Alexander v. Meiling

[2] 3 UNITED STATES DISTRICT COURT 4 DISTRICT OF NEVADA 5 * * * 6 JERRY ALEXANDER, et al., Case No. 3:16-cv-00572-MMD-CLB 7 Plaintiffs, ORDER v. [8] DEAN MEILING, et al., [9] Defendants. [10] 11 I. SUMMARY 12 Investors of Metalast International, LLC (“Metalast”) initiated this putative class 13 action against other investors and their alleged co-conspirators for purportedly engaging 14 in a fraudulent scheme to control Metalast. (ECF No. 1 at 10-11.) Before the Court are 15 three motions: (1) a Special Motion to Dismiss Under NRS § 41.660 and for Attorneys’ 16 Fees (the “Anti-SLAPP Motion”) (ECF No. 137) filed by Defendants Dean Meiling, Madylon 17 Meiling, Chemeon Surface Technology, LLC, Metalst Surface Technology, LLC, D&M-MI, 18 LLC, DSM Partners, LP, and Meiling Family Partners, Ltd. (collectively the “Meilings”); (2) 19 the Meilings’ Renewed Motion to Dismiss (ECF No. 134); and (3) Defendant Janet 20 Chubb’s (“Chubb”) Motion to Dismiss (ECF No. 140).1 Because the Court agrees with 21 Defendants that the litigation privilege bars Plaintiffs’ claims—and as further explained [23] 24 1Chubb also joined the Meilings’ motion to dismiss (ECF No. 138 (joinder to ECF No. 134)) and Anti-SLAPP Motion (ECF No. 139 (joinder to ECF No. 137)). Although 25 Defendants James Proctor (“Proctor”) and Meridian Advantage (“Meridian”) have not joined in the motions, the Court will extend its ruling on all motions to Proctor and Meridian 26 because the claims against all Defendants are essentially the same. See Silverton v. Dep't of Treasury, 644 F.2d 1341 , 1345 (9th Cir. 1981) (holding district court may sua sponte 27 grant motion to dismiss as to defendants who have not moved to dismiss where such defendants are in a position similar to that of moving defendants). [28] 2 “MTDs”) and deny the Anti-SLAPP Motion.2 3 II. BACKGROUND 4 The following facts are adapted from the Complaint (ECF No. 1) unless otherwise 5 indicated. 6 Plaintiffs are part of a group of over 900 investors who made an initial capital 7 investment of over $90,000,000 in Metalast. (Id. at 9-10.) Metalast later acquired more 8 capital and loans from an array of sources, including the Meilings. (Id. at 4-5, 10.) 9 Defendants later conspired to use the Meilings’ capital contribution and loans to 10 Metalast to fraudulently acquire its assets. (Id. at 10.) As part of this scheme, Defendants 11 misrepresented that the Meilings would provide Metalast with more funding, but they never 12 did, causing Metalast to stop seeking funding from other sources. (Id. at 10-11, 15-17.) As 13 part of the feigned negotiation, Defendants obtained access to Metalast’s confidential and 14 proprietary information, and later used the information to file a receivership action against 15 Metalast to take over its assets (Id. at 10-11.) In fact, “[D]efendants were planning to file a 16 state court receivership action” when they feigned negotiations, and Dean Meiling was 17 using the negotiation to “obtain[] further fodder to use in support of the receivership action.” 18 (ECF No. 45 at 3-4.)3 During negotiations, Defendants also misrepresented that the 19 Meilings’ legal counsel was Chubb and their accountant was Proctor. (ECF No. 1 at 1020 11, 15-17.) These misrepresentations occurred in two meetings sometime in March and 21 April 2013. (See ECF No. 145 at 5; ECF No. 146 at 4.) 22 On April 16, 2013, Chubb helped the Meilings petition the Nevada state court (the 23 “State Court”) for appointment of Proctor and his employer Meridian as receiver for 24 Metalast. (Id. at 11, 20.) The State Court granted the Meilings’ petition and initiated a [25] 26 2The Court has also reviewed the parties related briefs (ECF Nos. 135, 145, 146, 147, 148, 152, 153, 154) [27] 3Defendants previously filed a first set of MTDs. (ECF Nos. 28, 31, 34.) The Court 28 denied these motions as moot with leave to refile after the Court imposed a stay in this case, pending a state court decision in a related case. (ECF No. 100.) 2 Proctor removed and prevented Metalast’s managing member from contacting Metalast’s 3 members, which further prevented the members from timely participating or protecting 4 their interests in the Receivership Action. (Id. at 11.) Moreover, Proctor improperly 5 appointed Dean and Madylon Meiling to take over Metalast’s operations for the purpose 6 of devaluing Metalast and to misrepresent that the company could no longer continue. 7 (Id.) In the Receivership Action, Defendants also misrepresented Metalast’s financial 8 affairs and Proctor’s status as an independent party. (Id. at 11, 16.) The alleged fraudulent 9 scheme culminated with a transfer and conversion of a majority of Metalast’s assets to 10 Defendants (id. at 11, 17). 11 Plaintiffs assert claims against the Meilings for: (1) breach of contract, (2) breach 12 of the duty of good faith and fair dealing, and (3) tortious breach of the duty of good faith 13 and fair dealing, (4) unjust enrichment, and (5) conversion. (Id. at 11-14, 21-22.) 14 Additionally, Plaintiffs assert claims against all Defendants for: (1) civil conspiracy, (2) 15 fraud, and (3) negligent misrepresentation. (Id. at 14-18.) Finally, Plaintiffs assert the 16 following claims: (1) breach of fiduciary duty against the Meilings and Proctor; (2) 17 professional negligence against Proctor and Meridian; and (3) respondeat superior against 18 Meridian for Proctor’s conduct. (Id. at 18-21, 23.) 19 III. ANTI-SLAPP MOTION 20 Defendants assert that Plaintiffs’ action is a strategic lawsuit against public 21 participation (“SLAPP”), which seeks to collaterally attack Defendants’ participation in the 22 Receivership Action. (ECF No. 137 at 6.) The Court will address the Anti-SLAPP Motion 23 first. Because the Court will deny that motion, the Court will then address the MTDs. 24 Under NRS § 41.650, “[a] person who engages in a good faith communication in 25 furtherance of the right to petition . . . in direct connection with an issue of public concern 26 is immune from civil liability for claims based upon the communication.” “[T]he purpose of 27 Nevada's anti-SLAPP statute is . . . [to] protect[] well-meaning citizens who petition the 28 government and then find themselves hit with retaliatory suits known as SLAPP suits.” 2 quotations omitted). Where a SLAPP lawsuit is filed, the defendant may bring a special 3 motion to dismiss. NRS § 41.660(1). The movant must make a “threshold showing that 4 the lawsuit is based on good faith communications made in furtherance of the right to 5 petition the government.” John, 219 P.3d at 1282 (internal quotations omitted). The 6 movant can do so by establishing that its communication falls within one of four specific 7 categories of protected speech. See NRS § 41.637. 8 Here, Defendants rely on the third form listed at NRS § 41.637(3), which concerns 9 a “[w]ritten or oral statement made in direct connection with an issue under consideration 10 by a legislative, executive or judicial body, or any other official proceeding authorized by 11 law.” (See ECF No. 137 at 6-7.) NRS § 41.637(3). In particular, Defendants argue that 12 Plaintiffs’ claims—which revolve around Defendants’ takeover of Metalast’s assets—arise 13 out of Defendants’ petitioning activities in the Receivership Action. (ECF No. 137 at 8-9.) 14 Plaintiffs counter that their claims arise out of “harms suffered by Plaintiffs . . . as a result 15 of [Defendants’] conduct prior to the Receivership Action.” (ECF No. 147 at 4-5 (emphasis 16 added); see also id. at 5 (“[T]he Complaint is based on conduct wholly separate from the 17 filing of the Receivership Action itself. . .”).) Plaintiffs’ argument is not persuasive, but the 18 Court will still deny the Anti-SLAPP Motion. 19 Defendants have not met the threshold showing that the communications at issue 20 here were made in good faith. Plaintiffs allege that, prior to the Receivership Action, 21 Defendants misrepresented Chubb and Proctor’s relationship with the Meilings and that 22 the Meilings would provide funding to Metalast. (ECF No. 1 at 10-11.) As 23 misrepresentations, these statements do not constitute “good faith communications” under 24 the anti-SLAPP statute. See NRS § 41.637 (defining “good faith communication” as 25 communication that “is truthful or is made without knowledge of its falsehood”); see also 26 Smith v. Craig, Case No. 2:19-cv-824-GMN-EJY, 2020 WL 1065715 , at *6 (D. Nev. Mar. 27 4, 2020) (dismissing anti-SLAPP motion because defendants allegedly made statements 28 “‘with actual knowledge of their falsity’”). 2 Receivership Action. Plaintiffs argue—and Defendants do not dispute—that the “only 3 issue in the Receivership Action was the apparent solvency of [Metalast].” (ECF No. 145 4 at 16.) The State Court “did not make any findings of fact regarding the actions and 5 omissions of [Defendants] prior to the date that the Receivership Action commenced.” (Id.) 6 See NRS § 41.637(3). Accordingly, the Court denies the Anti-SLAPP Motion. 7 IV. MOTIONS TO DISMISS 8 A. Legal Standard 9 A court may dismiss a plaintiff’s complaint for “failure to state a claim upon which 10 relief can be granted.” Fed. R. Civ. P. 12(b)(6). A properly pled complaint must provide “a 11 short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. 12 R. Civ. P. 8(a)(2); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). While Rule 8 13 does not require detailed factual allegations, it demands more than “labels and 14 conclusions” or a “formulaic recitation of the elements of a cause of action.” Ashcroft v. 15 Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 555 .) “Factual allegations 16 must be enough to rise above the speculative level.” Twombly, 550 U.S. at 555 . Thus, to 17 survive a motion to dismiss, a complaint must contain sufficient factual matter to “state a 18 claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 678 (internal citation omitted). 19 And it must contain either direct or inferential allegations concerning “all the material 20 elements necessary to sustain recovery under some viable legal theory.” Twombly, 550 21 U.S. at 562 (quoting Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir. 22 1989) (emphasis in original)). 23 In Iqbal, the Supreme Court clarified the two-step approach district courts are to 24 apply when considering motions to dismiss. First, a district court must accept as true all 25 well-pled factual allegations in the complaint; however, legal conclusions are not entitled 26 to the assumption of truth. See Iqbal, 556 U.S. at 678-79 . Mere recitals of the elements of 27 a cause of action, supported only by conclusory statements, do not suffice. See id. at 678 . 28 Second, a district court must consider whether the factual allegations in the complaint 2 a plausible claim for relief . . . [is] a context-specific task that requires the reviewing court 3 to draw on its judicial experience and common sense.” Id. at 679 . A claim is facially 4 plausible when the plaintiff’s complaint alleges facts that allow a court to draw a 5 reasonable inference that the defendant is liable for the alleged misconduct. See id. at 6 678. Where the complaint does not permit the court to infer more than the mere possibility 7 of misconduct, the complaint has “alleged—but it has not show[n]—that the pleader is 8 entitled to relief.” Id. at 679 (internal quotation marks omitted). This is insufficient. When 9 the claims in a complaint have not crossed the line from conceivable to plausible, the 10 complaint must be dismissed. See Twombly, 550 U.S. at 570 . 11 B. Discussion 12 Plaintiffs clarify that they only seek relief for Defendants’ misconduct prior to the 13 Receivership Action (ECF No. 147 at 4-5), therefore the Court will not address any 14 misconduct that allegedly occurred after that action commenced. 15 As a preliminary matter, the Court will dismiss any claims predicated on 16 Defendants’ misrepresentation that Chubb was the Meilings’ legal counsel (ECF No. 1 at 17 10-11). Plaintiffs contradict themselves by alleging that the “Fraudulent Scheme involved 18 MEILING DEFENDANTS, along with their legal counsel Defendant JANET CHUBB,” and 19 that Chubb assisted the Meilings in filing a petition in State Court. (Id. at 10-11 (emphasis 20 added).) Plaintiffs have pled these allegations out of court with fatal contradictions. See 21 Hill v. Wells Fargo Bank, N.A., Case No. 2:18-cv-1350-MMD-BNW, 2019 WL 5395439 , at 22 *4 (D. Nev. Oct. 21, 2019) (citing to Weisbuch v. Cty. of Los Angeles, 119 F.3d 778 , 783 23 n.1 (9th Cir. 1997)). 24 The two remaining misrepresentations concern Defendants’ promise to provide 25 additional funding to Metalast and their misrepresentation that Proctor was the Meilings’ 26 accountant. (ECF No. 1 at 15-17.) Defendants argue that the litigation privilege bars all 27 claims predicated on these protected statements. (See ECF No. 134 at 29; see also ECF 28 No. 138; ECF No. 140 at 7-9.) The Court agrees. 2 in the course of judicial proceedings, even if those acts would otherwise be tortious.” 3 Greenberg Traurig v. Frias Holding Co., 331 P.3d 901 , 902 (Nev. 2014); see also Bullivant 4 Houser Bailey PC v. Eighth Judicial Dist. Court of State ex rel. Cty. of Clark, 381 P.3d 597 5 (Nev. 2012) (citations and internal quotes omitted) (holding that the privilege bars “any 6 civil litigation” and “all claims based” on communications protected by the privilege). “The 7 scope of the absolute privilege is quite broad,” and “courts should apply the absolute 8 privilege liberally, resolving any doubt in favor of its relevancy or pertinency.” Fink v. 9 Oshins, 49 P.3d 640, 644 (Nev. 2002).4 10 As an initial matter, Plaintiffs argue that there is no supporting authority for applying 11 the privilege here to protect Defendants “from liability for fraud, conspiracy, or covert and 12 surreptitious actions.” (ECF No. 145 at 21; ECF No. 146 at 12.)5 To the contrary, litigation 13 privilege is absolute and can extend to “statements made with knowledge of falsity and 14 malice.” Blaurock v. Mattice Law Offices, Case No. 64494, 2015 WL 3540903 , at *1 (Nev. 15 App. Ct. 2015).6 Courts have also dismissed “all claims based” on communications [16] 17 4The “policy underlying the privileges is that in certain situations the public interest in having people speak freely outweighs the risk that individuals will occasionally abuse 18 the privilege by making false and malicious statements.” Spitzmesser v. Tate Snyder Kimsey Architects, LTD., Case No. 2:10-cv-1700-KJD, 2011 WL 2552606 , at *5 (D. Nev. 19 June 27, 2011) (quoting Circus Circus Hotels, Inc. v. Witherspoon, 657 P.2d 101, 104 (1983)); see also Hampe v. Foote, 47 P.3d 438, 440 (Nev. 2002), abrogated on other 20 grounds by Buzz Stew, LLC v. City of North Las Vegas, 181 P.3d 670 (Nev. 2008) (“An absolute privilege is an immunity, which protects against even the threat that a court or 21 jury will inquire into a communication.”). 22 5Plaintiffs appear to argue that litigation privilege does not apply to fraudulent conduct that occurred prior to the Receivership Action, based on United States Magistrate 23 Judge Valerie Cooke’s order in this case. (ECF No. 145 at 21 (citing to ECF No. 65 at 6); ECF No. 146 at 12 (same).) Not only is this position legally incorrect, but Judge Cooke’s 24 analysis is irrelevant here because she was discussing whether Proctor was entitled to quasi-judicial immunity based on his status as the receiver. (See ECF No. 65 at 6.) [25] 6In response to Chubb’s MTD (ECF No. 140), Plaintiffs argue that their allegations 26 against Chubb “are not tied to communications or statements that she made . . ., but rather actions and omissions in which she engaged” in furtherance of the fraudulent scheme. 27 (ECF No. 146 at 13.) The Court is puzzled as to what other “actions” Plaintiffs are referring to other than Chubb’s statements. Regardless, Chubb correctly points out that litigation 28 privilege applies to communicative acts—it is not limited to statements. (See ECF No. 153 (fn. cont…) 2 of N. Las Vegas, Case No. 2:13-cv-343-JAD-CWH, 2015 WL 4506179 , at *3 (D. Nev. July 3 23, 2015) (listing cases where litigation privilege barred claims for breach of fiduciary duty, 4 breach of implied covenant of good faith and fair dealing, joint venture, and civil 5 conspiracy). 6 Plaintiffs essentially allege that Defendants engaged in communicative acts in 7 contemplation of the Receivership Action. (ECF No. 154 at 11; ECF No. 134 at 29.) 8 Litigation “privilege applies to communications made by either an attorney or a 9 nonattorney that are related to ongoing litigation or future litigation contemplated in good 10 faith.” See Jacobs v. Adelson, 325 P.3d 1282 , 1285 (Nev. 2014). But the privilege will not 11 apply to statements made to “those without direct involvement in the judicial proceeding” 12 unless “the recipients of the communication [are] significantly interested” or have a “legal 13 or financial interest in the underlying litigation.” Id. at 1287 (citation omitted). Moreover, 14 determining a recipient’s interest is a “‘case-specific, fact-intensive inquiry’ that must focus 15 on and balance the underlying principles of the privilege.” Id. (same). Litigation privilege 16 clearly applies to the communicative acts alleged here. 17 First, Defendants were planning to file the Receivership Action when they 18 purportedly feigned negotiations and, in fact, used information obtained during 19 negotiations by filing it in State Court. (ECF No. 45 at 3-4; see also id. at 4 (arguing that 20 Proctor “was already seeking to be appointed receiver in the state court action” when he 21 lied about being the Meilings’ accountant).) Second, misrepresentations about funding and 22 Proctor’s relationship with the Meilings clearly relate to issues in the Receivership Action, 23 i.e. whether Metalast is solvent and, if not, who should serve as its receiver. Third, litigation [25] at 4.) See Bullivant, 381 P.3d 597 (emphasis added) (“[T]here is ‘no reason to distinguish 26 between communications made during the litigation process and conduct occurring during the litigation process.’”). Furthermore, omissions can be deemed communicative acts. See 27 Las Vegas Sands Corp. v. First Cagayan Leisure & Resort Corp., Case No. 2:14-cv-424JCM-NJK, 2016 WL 4134523 , at *2 (D. Nev. Aug. 2, 2016) (applying litigation privilege to 28 omissions deemed as communicative acts). 2 Action, and Plaintiffs who, as Metalast investors, claim they had legal and financial 3 interests in the action.7 (See ECF No. 1 at 11.) See Jacobs, 325 P.3d at 1287. Finally, it 4 is noteworthy that Plaintiffs are essentially suing Defendants for participating in the 5 Receivership Action because: (1) Plaintiff’s sole injury—Defendants’ takeover of Metalast 6 and its assets—stems from the Receivership Action; and (2) Defendants allegedly caused 7 the injury when they used fraudulently-obtained information to file in the Receivership 8 Action—information that Plaintiffs do not dispute are accurate. (See ECF No. 1 at 10-23.)8 9 Therefore, applying litigation privilege here would serve the doctrine’s underlying policy of 10 “promot[ing] the truth finding process in a judicial proceeding” and “lessen[ing] the chilling 11 effect on those who seek to utilize the judicial process to seek relief.” See Jacobs, 325 12 P.3d at 1286-87 (citations omitted). 13 In sum, the Court finds that Plaintiffs’ claims are barred by litigation privilege. See 14 Fink, 49 P.3d at 644 (affirming district court’s decision to resolve any doubts in favor of 15 broadly applying litigation privilege to statements made prior to judicial proceedings); 16 Bullivant, 381 P.3d 597 (applying litigation privilege to attorney’s demand letter to 17 adversarial party “feigning ignorance of the 60-month closing date” because the statement 18 was made in contemplation and relation to litigation). Accordingly, the Court will grant the 19 MTDs.9 [20] 21 7While the Complaint is ambiguous as to who the misrepresentations were directed at, Plaintiffs indicate in their responses to the MTDs that Defendants made 22 misrepresentations to Metalast’s executives, which Plaintiffs later discovered. (See ECF No. 145 at 5; ECF No. 146 at 5.) [23] 8Although Plaintiffs insist that the Receivership Action is incidental to their claims 24 (ECF No. 147 at 5), they fail to coherently articulate how Defendants can wrongfully convert Metalast’s assets without the Receivership Action. [25] 9A court should “freely give” leave to amend when there is no “undue delay, bad 26 faith[,] dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of . . . 27 the amendment, [or] futility of the amendment.” Fed. R. Civ. P. 15(a); Foman v. Davis, 371 U.S. 178, 182 (1962). Generally, leave to amend is only denied when it is clear that the 28 deficiencies of the complaint cannot be cured by amendment. See DeSoto v. Yellow (fn. cont…) V. CONCLUSION 2 The Court notes that the parties made several arguments and cited to several cases 3 || not discussed above. The Court has reviewed these arguments and cases and determines 4 || that they do not warrant discussion as they do not affect the outcome of the motions before 5 || the Court. 6 It is therefore ordered that Defendants’ Special Motion to Dismiss Under NRS § 7 || 41.660 and for Attorneys’ Fees (ECF No. 137) is denied. 8 It is further ordered that Defendants’ motions to dismiss (ECF Nos. 134, 140) are 9 || granted. 10 It is further ordered that the Clerk of Court enter judgment in accordance with this 11 || order and close this case. 12 DATED THIS 21* day of July 2020. 13 CY. ~ 14 abn) = MIRANDA M. DU 15 CHIEF UNITED STATES DISTRICT JUDGE [26] 27 || Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992). Having reviewed the Complaint and parties’ briefs, the Court also finds that Plaintiffs cannot cure the deficiencies in their 28 step nt (See ECF No. 1 at 10-23; ECF No. 45 at 3-4; ECF No. 145 at 5; EF No. 146 ° 10