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Miesen v. Henderson

United States District Court, D. Idaho

September 26, 2017

DALE L. MIESEN, an individual who is a shareholder and who is also bringing this action on behalf of and/or in the right of AIA Services Corporation and its wholly owned subsidiary AIA Insurance, Inc., Plaintiff,
CONNIE TAYLOR HENDERSON, an individual; JOLEE K. DUCLOS, an individual; HAWLEY TROXELL ENNIS & HAWLEY LLP, an Idaho limited liability partnership; GARY D. BABBITT, an individual; D. JOHN ASHBY, an individual; RICHARD A. RILEY, an individual; MICHAEL W. CASHMAN SR., an individual; JAMES BECK, an individual; R. JOHN TAYLOR, an individual; CROP USA INSURANCE AGENCY, INC., an Idaho corporation; AIA SERVICES CORPORATION, an Idaho corporation; AIA INSURANCE, INC.; an Idaho corporation; CROP USA INSURANCE SERVICES, LLC; an Idaho limited liability company; and GEMCAP LENDING I, LLC, a Delaware limited liability company, Defendants.


          Honorable Candy W. Dale, United States Magistrate Judge.


         Pending before the Court are two related motions: Plaintiff Dale L. Miesen's Motion for Relief under Federal Rules of Civil Procedure 12(d) and 56(d) (Dkt. 241), and Defendant Gem Cap I, LLC's Motion to Dismiss Third Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief may be granted. (Dkt. 220.)

         The motions are ripe for the Court's consideration. All parties have consented to the jurisdiction of a United States Magistrate Judge pursuant to 20 U.S.C. § 636(c). (Dkt. 260.) The parties filed responsive briefing, and the Court conducted a hearing on September 6, 2017, at which the parties appeared and presented their arguments. After carefully considering the parties' written memoranda, relevant case law, and the parties' arguments, for the reasons that follow, the Court will deny Plaintiff's motion for relief and will grant in part and deny in part Defendant's motion to dismiss.


         The original complaint in this matter was filed on August 11, 2010. (Dkt. 1.) Donna J. Taylor and Dale L. Miesen filed the suit on behalf of themselves and the other shareholders of AIA Services, Inc., and its wholly-owned subsidiary, AIA Insurance (together “AIA entities”). Taylor was later removed from the lawsuit because her citizenship destroyed complete diversity as required by 28 U.S.C. § 1332-enabling this Court to continue to exercise subject matter jurisdiction.

         The complaint was filed against numerous managers and directors of the AIA entities (herein “AIA controlling defendants”), the AIA entities, and other individuals and entities. GemCap I, LLC (GemCap) first entered this lawsuit by filing a motion to intervene on July 18, 2016. (Dkt. 14.) The intervention was for a sole purpose-to seal a settlement agreement to which GemCap was a party that was attached as an exhibit to a declaration filed by Miesen's attorney. (Dkt. 128.)[1] GemCap was added as a party on April 24, 2017, with Miesen's filing of the Third Amended Complaint. (Dkt. 211.)

         GemCap's inclusion in this long-running controversy stems from a $10 million line of credit it extended to Defendant CropUSA Insurance Agency Inc., and its wholly-owned subsidiary, Defendant CropUSA Insurance Services, LLC (together “CropUSA entities”). Security for the line of credit was provided by the AIA entities.

         GemCap and the AIA entities entered into two loan guarantees related to the line of credit. The first-November 23, 2011, secured a lesser portion of the line of credit, and the second-October 1, 2012, secured the entire $10 million. In this suit, Miesen claims these two loan agreements were not authorized as required by the AIA entities' governing documents. (Dkt. 211 at 37.) According to the Third Amended Complaint, GemCap recorded its associated security interest in the AIA entities on December 20, 2012, by filing a UCC financing statement with the Idaho Secretary of State.[2] Although the existence and validity of the UCC financing statement is not disputed, Miesen claims the AIA minority shareholders were not notified of this filing, and as with the two loan agreements, it was not authorized. (Dkt. 211 at 37.) In turn, GemCap alleges the filing of the financing statement was itself sufficient to put the AIA minority shareholders on notice of the guarantee agreements.

         The CropUSA entities defaulted on their loan payments, and on July 30, 2013, GemCap filed a lawsuit in federal court in California to collect on the loan guarantee agreements. GemCap Lending I, LLC v. CropUSA Ins. Agency, Inc., No. 2:13-cv-05504-SJO-MAN (C.D. Cal.) (herein “GemCap lawsuit”). The action was terminated when the parties, including GemCap and several other entities and persons also party to this litigation, entered into a settlement agreement (herein “Settlement Agreement”) regarding the loan guarantees.

         The determination of when the AIA minority shareholders knew about the loan guarantees and the Settlement Agreement between the AIA entities and GemCap is of key importance to the motions before the Court.

         It is clear the AIA Services minority shareholders learned about the GemCap lawsuit soon after its filing in California. At the September 6, 2017 hearing on these motions, Miesen's attorney confirmed that certain AIA minority shareholders knew about the GemCap lawsuit by August of 2013.

         The minority shareholders also learned about the Settlement Agreement prior to its execution. As set forth in the Third Amended Complaint, the shareholders communicated to GemCap that the guarantees and proposed Settlement Agreement “were unauthorized [by the shareholders] and illegal and that AIA was not being properly operated.” (Dkt. 211 at 39.)

         The Settlement Agreement has an effective date of September 15, 2014. However, according to the Third Amended Complaint, the contents of the Settlement Agreement show it was finalized after the effective date and likely executed on or around January 9, 2015.

         In the Third Amended Complaint, Miesen asserts the following primary claims against GemCap: that GemCap aided and abetted the AIA controlling Defendants in breaching their fiduciary duties (Count 2); that GemCap aided and abetted the AIA controlling Defendants to commit fraud (Count 5); and that GemCap violated the Idaho Consumer Protection Act (ICPA) by entering into the two loan guarantees and the Settlement Agreement (Count 10). Miesen asserts two derivative claims: declaratory judgment that the guarantees and Settlement Agreement were not lawful (Count 7); and statutory relief under Title 30, Chapter 29, Section 304 of the Idaho Code (Count 8).[3]This code section allows shareholders to challenge a corporation's alleged ultra vires acts, and if successful, provides shareholders a right to enjoin or reverse the acts and collect damages. Idaho Code § 30-29-304(1)(a).

         GemCap filed the instant motion to dismiss all of Miesen's claims, arguing Counts 2, 5, and 10 are barred by the applicable statutes of limitation, and as derivative claims, Counts 7 and 8 should be dismissed on the same bases.


         1. Motion to Dismiss

         A motion to dismiss made pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of a party's claim for relief. A 12(b)(6) motion may be based on the expiration of the applicable statute of limitations period for the claims asserted in the complaint. Review of the merits of the 12(b)(6) motion is limited to the face of the complaint. A court's inquiry is whether the allegations in the pleading are sufficiently set forth. The plaintiff need only present a “short and plain statement of the claim” that shows the plaintiff is entitled to relief and that provides the defendant with fair notice of the grounds for the claim. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007); Fed.R.Civ.P. 8(a)(2).

         Upon review of a complaint pursuant to a Rule 12(b)(6) motion, a court must accept all non-conclusory factual allegations as true. Ashcroft v. Iqbal, 556 U.S. 662 (2009). And a court must draw all reasonable inferences in favor of the plaintiff. Mohamed v. Jeppsen Dataplan, Inc., 579 F.3d 943, 949 (9th Cir. 2009).

         2. Materials Outside the Pleadings; Motions to Take Judicial Notice

         If either party submits materials outside the pleadings in support of or in opposition to a Rule 12(b)(6) motion to dismiss, and a court relies on those materials, the motion to dismiss must be converted to a motion for summary judgment Fed.R.Civ.P. 12(d) and 56(c)(2); Anderson v. Angelon, 86 F.3d 932, 934 (9th Cir. 1996); Ross v. Ada County, 730 F.Supp.2d 1237, 1244 (D. Idaho 2010).

         However, a court may take judicial notice of certain documents and facts without converting the motion. Examples of taking judicial notice include noting that a document was signed by a particular person or on a particular date, or that a hearing simply took place. Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001); Fed.R.Evid. 201(b).

         And a court may also consider documents “whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading.” Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir.1994); See also Biondo v. Kootenai Hosp. Dist., No. 1:17-CV-00039-BLW, 2017 WL 2198186, at *2 (D. Idaho May 18, 2017).

         Finally, a court may take judicial notice of documents that are submitted as part of the complaint, or documents that are not physically attached to the complaint but that the complaint “necessarily relies” on, so long as their authenticity is not contested. Lazy Y. Ranch, Ltd. v. Wiggins, No. CV 06 340 S MHW, 2007 WL 1381805, at *5 (D. Idaho Mar. 13, 2007), ...

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