Security Alarm Financing Enterprises, Inc. v. Parmer et al
Filing
84
MEMORANDUM OPINION AND ORDER DENYING DEFENDANT MITCH BROZIKS 75 MOTION TO DISMISS PLAINTIFFS FIRST AMENDED COMPLAINT AND DIRECTING PLAINTIFF TO FILE A MORE DEFINITE STATEMENT on or before November 21, 2013. Signed by Senior Judge Frederick P. Stamp, Jr on 10/31/2013. (kac)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
SECURITY ALARM FINANCING
ENTERPRISES, INC.,
Plaintiff,
v.
Civil Action No. 1:12CV88
(STAMP)
BETTY PARMER, SECURE US, INC.
and MITCH BROZIK,
Defendants.
MEMORANDUM OPINION AND ORDER
DENYING DEFENDANT MITCH BROZIK’S MOTION TO DISMISS
PLAINTIFF’S FIRST AMENDED COMPLAINT AND
DIRECTING PLAINTIFF TO FILE A MORE DEFINITE STATEMENT
I.
Originally,
Procedural History
Security
Alarm
Financing
Enterprises,
Inc.
(“SAFE”) filed the above-styled civil action in this Court only
against the defendants, Secure US, Inc. (“Secure US”) and Betty
Parmer (“Parmer”).
In its complaint, SAFE asserted a claim of
successor liability as a result of the sale of defendant Secure US,
in addition to seeking a declaration that SAFE’s judgment lien
continues to attach to defendant Secure US’s assets, as the sale of
defendant Secure US was not commercially reasonable.
Defendant
Secure US then filed a motion to dismiss under Federal Rule of
Civil Procedure 12(b)(6) for failure to state a claim, which SAFE
opposed.
Thereafter, SAFE filed a request for entry of default as
to defendant Parmer, as defendant Parmer failed to file a timely
responsive pleading to SAFE’s complaint.
This Court then ordered
that default be entered against defendant Parmer.
After default
was entered, SAFE requested that this Court enter a default
judgment against defendant Parmer.
At that time, defendant Parmer
filed a motion to set aside default.1
SAFE then filed a motion to
amend its complaint wherein it sought to add two additional claims
and one additional party.
In its memorandum opinion and order, this Court first denied
defendant Secure US’s motion to dismiss, as this Court found that
SAFE had stated sufficient factual allegations to state a claim
upon which relief may be granted.
This Court then determined that
good cause existed to set aside default as to defendant Parmer, and
denied SAFE’s motion for default judgment.
As to the plaintiff’s
amended complaint, this Court found that granting SAFE leave to
amend would not prejudice the defendants, nor were the amendments
sought futile or brought in bad faith.
Thereafter, SAFE filed its amended complaint, wherein it
added claims for fraud and conspiracy to commit fraud. Included in
these two additional claims is an additional party, defendant Mitch
Brozik (“Brozik”).2
In response to the claims, defendant Brozik
1
Defendant Parmer entitled this motion and referred to her
request as a motion to set aside default judgment. However, as
this Court had not entered default judgment against defendant
Parmer at the time of this filing, this Court construes defendant
Parmer’s motion as a motion to set aside default.
2
This Court notes that defendant Brozik is not included in the
heading of Count III. In SAFE’s request for relief for Count III,
however, SAFE requests relief against “Brozik and Secure US.” ECF
2
filed a motion to dismiss seeking to dismiss both Counts III and
IV, which are the claims for fraud and conspiracy to commit fraud
respectively.
In support of his motion, Brozik argues: (1) the
claim for fraud was not plead with the requisite specificity; (2)
SAFE’s allegations against defendant Brozik are subject to waiver
for
failure
to
act;
indispensable party.
Brozik
thereafter
and
(3)
SAFE
has
failed
to
join
an
SAFE responded in opposition and defendant
filed
a
reply
in
support
of
his
motion.
Accordingly, the motion is fully briefed and ripe for review.
For
the reasons set forth below, this Court denies defendant Brozik’s
motion to dismiss.
II.
Facts
This action arises out of the sale of defendant Secure US to
defendant Parmer. In 2010, a judgment was entered in favor of SAFE
against defendant Secure US in the amount of $1,132,028.42.
This
judgment was the result of counterclaims filed by SAFE in a
separate proceeding for defamation, tortious interference, and
common law unfair competition.
Thereafter, SAFE registered a
certified copy of the judgment with this Court. At that time, SAFE
obtained a lien upon defendant Secure US’s assets after this Court
issued a writ of fieri facias.
SAFE then filed a motion for the
sale of defendant Secure US’s customer accounts, which defendant
No. 67 *17. Thus, for purposes of this order, this Court treats
defendant Brozik as a named party as to Count III.
3
Secure US opposed. The Milan Puskar Amended and Restated Revocable
Trust (“the Trust”), an entity that alleged it had superior lien of
defendant Secure US’s property in the amount of $4.4 million, then
intervened to oppose the sale as well.
Both the Trust and
defendant Secure US opposed the sale by stating that the sale
amount
would
not
satisfy
the
Trust’s
lien.
United
States
Magistrate Judge James E. Seibert then found that SAFE’s motion for
sale should be granted and this Court agreed, overruling objections
from the Trust and defendant Secure US.
Defendant Secure US then requested that SAFE agree to postpone
the sale to pursue additional settlement negotiations.
SAFE and
defendant Secure US filed a proposed agreed order continuing the
sale for the purpose of engaging in settlement discussions.
This
Court then issued an order continuing such sale until May 16, 2012,
for the purpose of working towards a settlement. SAFE alleges that
after this Court issued the order, defendant Secure US refused to
continue settlement negotiations.
SAFE contends that on April 20,
2012, it received a notice in the mail regarding a secured party
sale of defendant Secure US’s assets. This notice stated that such
sale would take place on May 5, 2012.
SAFE asserts that defendant Parmer bought the Trust’s notes
for $2.5 million prior to the scheduled sale. SAFE further asserts
that defendant Parmer is defendant Brozik’s aunt, and has no
history in the security alarm business, which defendant Secure US
4
conducts.
Defendant Brozik was the owner of defendant Secure US
until defendant Parmer eventually purchased defendant Secure US.
SAFE contends that it sent a letter objecting to the sale based on
irregularities and unusual terms that would discourage buyers,
which reached the attorney who would be conducting the sale.
SAFE
further contends that the attorney conducting the sale did not
adequately respond to potential buyers, specifically a Mr. Patrick
Egan.
Regarding the sale itself, SAFE asserts that numerous issues
existed.
Specifically, SAFE alleges that potential buyers were
only allowed to walk through the office and look around, and no
inspection of what was contained in the file cabinets was allowed.
Further, SAFE alleges that the potential buyers were denied access
to Secure US’s warehouse, which contained contents that were part
of the auction. SAFE also alleges that instead of defendant Parmer
accepting a $3.6 million cash bid for the assets, defendant Parmer
purchased the assets of the company for $4 million by issuing a
credit bid.
SAFE asserts that after purchasing these asserts, defendant
Parmer retained defendant Brozik’s new company, MB Security, to
manage,
control
and
monitoring business.
operate
the
assets
as
a
security
alarm
SAFE further, asserts that defendant Brozik
uses MB Security to manage and control the assets that defendant
5
Parmer purchased from defendant Secure US, in the exact same manner
he used them to run defendant Secure US prior to its sale.
III.
A.
Applicable Law
Motion to Dismiss Under 12(b)(6)
Rule 12(b)(6) of the Federal Rules of Civil Procedure allows
a defendant to raise the defense of “failure to state a claim upon
which
relief
can
be
granted”
as
a
motion
in
response
to
a
plaintiff’s complaint before filing a responsive pleading.
In assessing a motion to dismiss for failure to state a claim
under Rule 12(b)(6), a court must accept the factual allegations
contained in the complaint as true.
Advanced Health-Care Servs.,
Inc. v. Radford Cmty. Hosp., 910 F.2d 139, 143 (4th Cir. 1990).
Dismissal is appropriate only if “‘it appears to be a certainty
that the plaintiff would be entitled to no relief under any state
of facts which could be proven in support of its claim.’”
Id. at
143-44 (quoting Johnson v. Mueller, 415 F.2d 354, 355 (4th Cir.
1969)); see also Rogers v. Jefferson-Pilot Life Ins. Co., 883 F.2d
324, 325 (4th Cir. 1989).
A motion to dismiss for failure to state a claim under Rule
12(b)(6) should be granted only in very limited circumstances, as
the pleading requirements of Federal Rule of Civil Procedure
8(a)(2) only mandate “a short and plain statement of a claim
showing that the pleader is entitled to relief.” Conley v. Gibson,
355 U.S. 41, 47 (1957).
Still, to survive a motion to dismiss, the
6
complaint must demonstrate the grounds to entitlement to relief
with “more than labels and conclusions . . . factual allegations
must be enough to raise a right to relief above the speculative
level.”
B.
Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007).
Motion to Dismiss Under Rule 12(b)(7)
Federal Rule of Civil Procedure 19 establishes a two-step
inquiry to determine whether an action may continue without the
joinder of additional parties.
Nat’l Union Fire Ins. Co. v. Rite
Aid of South Carolina, Inc., 210 F.3d 246, 249 (4th Cir. 2000).
The
Court
first
must
determine
“necessary” to the action.
whether
the
absent
Fed. R. Civ. P. 19(a).
party
is
A party may be
“necessary” if in the party’s absence, the court cannot accord
complete relief among existing parties[,]” or if the party claims
an interest relating to the action and disposing of the action in
the party’s absence would “impair or impede the person’s ability to
protect the interest” or “leave an existing party subject to
substantial
risk
of
incurring
double,
multiple,
or
otherwise
inconsistent obligations because of the interest.” Fed. R. Civ. P.
19(a).
If the party is in fact necessary, the Court must then
determine whether “in equity and good conscience, the action should
proceed among the existing parties or should be dismissed.”
R. Civ. P. 19(b).
Fed.
Rule 19 outlines several factors for the Court
to consider in determining whether a necessary party’s absence
7
warrants dismissal, including “the extent to which a judgment
rendered in the person’s absence might prejudice that person or the
existing
parties,”
the
available
options
for
mitigating
any
prejudice, the adequacy of a judgment in the necessary party’s
absence, and “whether the plaintiff would have an adequate remedy
if the action were dismissed for non-joinder.”
Id.
“Dismissal of a case is a drastic remedy, however, which
should be employed only sparingly.”
F.3d
at
250
(quoting
Teamsters
Nat’l Union Fire Ins., 210
Local
Union
No.
171
v.
Keal
Driveaway Co., 173 F.3d 915, 918 (4th Cir. 1999)). “In determining
whether to dismiss a complaint, a court must proceed pragmatically,
‘examin[ing] the facts of the particular controversy to determine
the potential for prejudice to all parties, including those not
before it.’”
12(b)(7)
bears
indispensable.
Id.
the
The party moving for dismissal under Rule
burden
of
showing
an
absent
party
is
5C Charles Alan Wright & Arthur R. Miller, Federal
Practice and Procedure § 1356 (3d ed. 1998).
IV.
A.
Discussion
Motion to Dismiss Under Rule 12(b)(6)
Under West Virginia law, the essential elements of fraud are
as follows:
(1) that the act claimed to be fraudulent was the act of
the defendant or induced by him; (2) that it was material
and false; that plaintiff relied upon it and was
justified under the circumstances in relying upon it; and
(3) that he was damaged because he relied upon it.
8
Poling v. Pre-Paid Legal Servs., Inc., 575 S.E.2d 199, 202 (W. Va.
2002) (quoting Horton v. Tyree, 139 S.E. 737, 738 (W. Va. 1927)).
Rule 9(b) of the Federal Rules of Civil Procedure requires that
“[i]n
alleging
fraud
or
mistake,
a
party
must
state
with
particularity the circumstances constituting fraud or mistake.”
Fed. R. Civ. P. 9(b). The Fourth Circuit has interpreted Rule 9(b)
as requiring that a complaint identify the “time, place, and
contents of the false representations, as well as the identity of
the person making the misrepresentation and what he obtained
thereby.”
Harrison v. Westinghouse Savannah River Co., 176 F.3d
776, 784 (4th Cir. 1999) (citations omitted).
The primary purpose
of Rule 9(b) is to ensure “that the defendant has sufficient
information to formulate a defense by putting it on notice of the
conduct complained of.”
Id.
In ruling on a motion to dismiss
pursuant to Rule 9(b), the Fourth Circuit has cautioned that “if
the court is satisfied (1) that the defendant has been made aware
of the particular circumstances for which she will have to prepare
a
defense
at
trial,
and
(2)
that
plaintiff
has
substantial
prediscovery evidence of those facts” the district court should
hesitate in dismissing the action.
Id.
Defendant Brozik argues that as to the initial three elements
of a fraud claim, SAFE has failed to state a claim of fraud as to
him because its allegations of fraud are conclusory and such,
conclusory allegations fail to state a time, place or the contents
9
of the alleged fraud.
Further, defendant Brozik argues that the
conspiracy to commit fraud claim should also be dismissed as to him
because fraud is the “gravamen” to the conspiracy to commit fraud
claim.
In response, SAFE asserts that it did allege sufficient
facts necessary to satisfy Rule 9(b) standards.
This Court finds that it is necessary to deny defendant
Brozik’s motion to dismiss as to both the fraud and conspiracy to
commit fraud claims based on insufficient allegations as to the
first three elements of a fraud claim.
This Court cannot say with
confidence that, under the facts currently alleged, SAFE is not
entitled to relief under these two claims.
As to the fraud claim,
SAFE does allege that defendant Brozik “authorized, instructed, or
otherwise
knowingly
participated
in
Secure
US’s
fraudulent
misrepresentation to SAFE regarding its intent to engage in good
faith settlement negotiations.”
While Secure US’s fraudulent
misrepresentations are sufficiently alleged in regards to the time,
place and contents requirements in the preceding paragraphs of the
complaint, the requirements for defendant Brozik’s involvement in
those
misrepresentations
are
not.
Thus,
in
order
to
allow
defendant Brozik to reasonably answer the complaint, SAFE is
directed to file a more definite statement pursuant to Rule 12(e)
of the Federal Rules of Civil Procedure.
The statement should
state with particularity the circumstances constituting fraud.
10
Specifically, it should state the time, place, and contents of the
false representations made by defendant Brozik.
Defendant Brozik next argues that as to the damages element,
SAFE’s fraud claim fails for lack of damages.
As the plaintiff
notes, however, it is well established that under West Virginia
law, a plaintiff who has been injured by the fraudulent conduct of
a defendant is entitled to an award of attorneys’ fees. Bowling v.
Ansted Chrysler-Plymouth-Dodge Inc., 425 S.E.2d 144 (W. Va. 1992).
In his reply, defendant Brozik seems to argue that it is impossible
for
SAFE
to
have
misrepresentations,
been
injured
by
and
therefore,
any
of
Brozik’s
to
have
incurred any damages as a result of such misrepresentations.
This
Court
disagrees.
SAFE
is
at
impossible
least
alleging
for
it
alleged
that
based
on
misrepresentations made that resulted in the postponement of SAFE’s
court-ordered sale of defendant Secure US, it was injured, as it
incurred attorneys’ fees seeking a declaration that the secured
party sale was a sham that did not extinguish SAFE’s judgment lien
on defendant Secure US’s assets.
This Court finds such a claim is
sufficient to satisfy the damages element of the fraud claim.
B.
Waiver for Failure to Act
In West Virginia, to establish waiver, “there must be evidence
demonstrating that a party has intentionally relinquished a known
right.”
Potesta v. U.S. Fidelity & Guar. Co., 504 S.E.2d 135, 142
(W. Va. 1998) (citations omitted).
11
The waiver may be expressed or
implied but if the waiver is implied, “there must be clear and
convincing evidence of the party’s intent to relinquish the known
right.”
Id.
The party asserting waiver has the burden of
establishing the defense.
Id.
Accordingly, in this instance, the
burden is upon the defendant to prove such waiver.
Defendant Brozik asserts that SAFE’s failure to take any
proactive steps, such as judicial intervention, to prevent the sale
that it now complains of, constitutes a waiver of SAFE’s right to
now complain of such sale.
This Court, however, finds that the
defendant has not presented this Court with clear and convincing
evidence that SAFE did waive any such rights.
Court
notes
that
defendant
Brozik
did
not
Initially, this
allege
that
SAFE
expressly waived any of its rights, and this Court also finds no
such waiver based on the record.
action
that
this
Court
is
Further, SAFE did not take any
aware
of,
which
would
allow
the
defendants to believe that SAFE was giving up any rights associated
with the sale.
Moreover, as SAFE notes, this Court is unaware of
any precedent that requires that a creditor seek to enjoin a sale
of the debtor’s assets in order to secure its rights to bring
claims similar to those asserted in this action after such sale is
completed.
Accordingly, this Court concludes that SAFE did not
waive its right to assert the claims made in its complaint.
12
C.
Indispensable Party
Under Rule 19(a), this Court must first determine whether the
absent party is a necessary party prior to determining whether such
party is indispensable under Rule 19(b).
(b).
Fed. R. Civ. P. 19(a)-
To determine whether a party is a necessary party for
purposes of Rule 19(a), this Court must determine if: “(1) complete
relief can be accorded among the present parties to the lawsuit;
(2) the absent party’s ability to protect its interest will be
impaired; and (3) any existing parties might be subjected to a
substantial risk of multiple or inconsistent obligations unless the
absent party is joined.”
Thomas v. United States, 189 F.3d 662,
667 (7th Cir. 1999) (citing Fed. R. Civ. P. 19(a)).
Defendant
Brozik
necessary party.
claims
that
ICV
Partners
(“ICV”)
is
a
Defendant Brozik alleges that ICV is the parent
corporation of SAFE based on a press release issued in December
2012. As the parent corporation, defendant Brozik alleges that ICV
has an interest in the outcome and is irrevocably affected by the
outcome because ICV has acquired all SAFE’s assets, including the
outstanding judgment.
SAFE responds by asserting that ICV is not
its parent corporation.
In support of this assertion, SAFE notes
that ICV’s press release, cited by defendant Brozik, indicates that
ICV acquired SAFE Security, Inc., rather than SAFE, the plaintiff
in this action.
In its reply, defendant Brozik does not contest
this assertion.
Accordingly, because it seems that ICV is not
13
SAFE’s parent corporation and defendant Brozik does not assert any
further connection between the two corporations, this Court finds
that ICV does not have an interest in this action.
Thus, ICV is
not a necessary party, and therefore, this Court need not address
whether ICV is an indispensable party for purposes of dismissal.
V.
Conclusion
For the reasons stated above, defendant Brozik’s motion to
dismiss (ECF No. 75) is DENIED.
The plaintiff, however, is
DIRECTED to file a more definite statement in accordance with the
above findings as to its fraud and conspiracy to commit fraud
claims on or before November 21, 2013.3
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein.
DATED:
October 31, 2013
/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE
3
SAFE is further DIRECTED to amend the heading and request for
relief in Count III, SAFE’s fraud claim, so as to be clear as to
which parties SAFE is asserting a claim of fraud.
14
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