United States District Court, D. Idaho
YELLOWSTONE POKY, LLC, an Idaho Limited Liability Company, Plaintiff,
FIRST POCATELLO ASSOCIATES, L.P., Defendant. FIRST POCATELLO ASSOCIATES, L.P., Counterclaim ant,
YELLOWSTONE POKY, LLC, an Idaho Limited Liability Company, and FEATHERSTON HOLDINGS, INC. Counterdefendant.
ORDER STAYING CASE
Lynn Winmill, United States District Court Chief Judge.
First Pocatello Associates, L.P., brought to the Court's
attention, through a Motion to Dismiss pursuant to Rule
12(b)(1) (Dkt. 30), that Plaintiffs predecessor-in-interest,
Featherston Holdings, Inc. ("FHI"), is a
tax-suspended California corporation. Proceedings are pending
to revive FHI's corporate status. The Court now
considers, sua sponte, whether to order a brief stay
to allow FHI to pursue reinstatement before considering the
pending Motion to Dismiss (Dkt. 30).
action arises out of an alleged real estate purchase and sale
agreement (the "Agreement") between Defendant First
Pocatello Associates, L.P., and Featherston Holdings, Inc., a
California corporation. FHI allegedly assigned its interest in
the Agreement to Yellowstone Poky, LLC, the Plaintiff in this
lawsuit. Yellowstone Poky alleges that First Pocatello failed
to perform its obligations under the contract and brings
claims for breach of contract, unjust enrichment, and
September 30, 2016, First Pocatello filed a Motion to Dismiss
for Lack of Jurisdiction under Rule 12(b)(1) (Dkt. 30).
Defendant argues primarily that Yellowstone Poky lacks
standing to pursue the present action because its
predecessor-in-interest, FHI, is a tax-suspended California
corporation. The argument is twofold. First, Defendant argues
that as a suspended corporation, FHI lacked the capacity to
enter into the Agreement and thus it is unenforceable.
Therefore, Defendant argues, Yellowstone Poky was not
assigned a "legally protected interest" in the
Agreement and can show no "injury in fact"
necessary to confer standing. The second argument rests on
the fact that FHI, as a suspended California corporation,
cannot sue or defend a lawsuit. Defendant argues that
Yellowstone Poky, as the purported assignee of FHI, is
subject to the same defense and therefore lacks
"standing" to bring this lawsuit. See Cal-W.
Bus. Servs., Inc. v. Coming Capital Grp., 163
Cal.Rptr.3d 911, 917 (Cal.Ct.App. 2013). If Defendant is
correct, this Court lacks subject matter jurisdiction over
response brief, Plaintiff informed the court that proceedings
are pending to obtain a "Certificate of Revivor"
from the California Franchise Tax Board, which would
reinstate FHI's corporate status. The central
disagreement between the parties concerns the effect a
successful reinstatement would have on Plaintiffs Motion to
Dismiss under Rule 12(b)(1). Defendant argues that a
Certificate of Revivor would not validate the alleged
Agreement or standing deficiencies, meaning a stay would be
futile. Plaintiff disagrees, arguing that reinstatement of
FHI's corporate rights would retroactively cure the
voidability of the agreement and reinstate Yellowstone
Poky's capacity to sue
District Court has broad discretion to stay proceedings as an
incident to its power to control its own docket."
Enelow v. New York Life Ins. Co., 293 U.S. 379, 382
(1935). In considering whether to issue a stay, the Court
must weigh several "competing interests . . .,
[including] the hardship or inequity which a party may suffer
in being required to go forward, and the orderly course of
justice measured in terms of the simplifying or complicating
of issues, proof, and questions of law which could be
expected to result from a stay." CMAX, Inc. v.
Hall, 300 F.2d 265, 268 (9th Cir. 1962).
Judicial Economy Favors a Stay
the Court must consider whether a stay would further
"the orderly course of justice" by simplifying
issues, proof, and questions of law in this case.
CMAX, 300 F.2d at 268. The Court finds that
principles of judicial economy strongly dictate in favor of a
stay, as a successful reinstatement of FHI's corporate
status would render Plaintiffs 12(b)(1) Motion largely moot.
Effect of Revival on Plaintiff's Capacity to Sue
corporation's capacity to sue or be sued is determined
"by the law under which it was organized."
Fed.R.Civ.P. 17(b). Under California law, a California
corporation whose powers have been suspended for failure to
pay taxes lacks the capacity to sue or defend a lawsuit.
See Bourhis v. Lord, 295 P.3d 895 (Cal. 2013); Cal.
Rev. & Tax Code § 23301. However, the California
Supreme Court has held that once a suspended corporation pays
its taxes and obtains a Certificate of Revivor, the
corporation may continue an action filed during the period of
suspension and not previously dismissed. See Peacock Hill
Assn. v. Peacock Lagoon Constr. Co., 503 P.2d 285 (Cal.
1972) ("[Our] authorities make clear that as to matters
occurring prior to judgment the revival of corporate powers
has the effect of validating the earlier acts and permitting
the corporation to proceed with the action.").
the Court finds that a successful reinstatement of FHI's
corporate status would render moot the challenge to