Billing Assocs. Nw. v. Addison Data Servs.

• Decision Date: 16 November 2022
• Docket Number: C20-1854RSM
• Parties: BILLING ASSOCIATES NORTHWEST, LLC, a Washington limited liability company, Plaintiff, v. ADDISON DATA SERVICES, LLC., a Texas limited liability company; LESLIE W. KREIS, Jr., a Texas resident; MENEDOZA LINE CAPITAL, LLC, a limited liability company; DAVID DURHAM, KORENVAES HORIZON PARTNERS, L.P, a limited partnership; CHRISTOPHER HARPER, a Texas resident; CORBETT CAPITAL LLC, a limited liability company; PAT CRAINE, a Texas resident; JOE CRAINE, a Texas resident; and JOHN/JANE DOES, fictitious names for persons receiving constructive trust property, Defendants.
• Court: U.S. District Court — Western District of Washington

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BILLING ASSOCIATES NORTHWEST, LLC, a Washington limited liability company, Plaintiff, v. ADDISON DATA SERVICES, LLC., a Texas limited liability company; LESLIE W. KREIS, Jr., a Texas resident; MENEDOZA LINE CAPITAL, LLC, a limited liability company; DAVID DURHAM, KORENVAES HORIZON PARTNERS, L.P, a limited partnership; CHRISTOPHER HARPER, a Texas resident; CORBETT CAPITAL LLC, a limited liability company; PAT CRAINE, a Texas resident; JOE CRAINE, a Texas resident; and JOHN/JANE DOES, fictitious names for persons receiving constructive trust property, Defendants.

No. C20-1854RSM

United States District Court, W.D. Washington, Seattle

November 16, 2022

ORDER GRANTING ADDISON DATA SERVICES' AND LLC MEMBERS' MOTIONS TO DISMISS WITH LEAVE TO AMEND

RICARDO S. MARTINEZ, UNITED STATES DISTRICT JUDGE

I. INTRODUCTION

This matter comes before the Court on Defendant Addison Data Services' (“ADS”) Motion to Dismiss, Dkt #35, and Defendants LLC Members (“Remaining Defendants”)'s Motion, Dkt. #30, brought under Rule 12(b)(6). Plaintiff Billing Associates Northwest (“Billing Associates”) has filed briefs responding to the Motions. Dkt. #38; Dkt. #31. The Court has reviewed and finds that oral argument is not necessary. For the reasons stated below, the Court GRANTS Defendants' Motions and dismisses Plaintiff's claims with leave to amend.

II. BACKGROUND^[1]

Plaintiff Billing Associates is a Washington limited liability company that provides contract procurement and sales representative type services. See Dkt. #1 at 2-3. ADS DEL is a Delaware limited liability company that subsequently assigned its rights and duties to ADS, a Texas limited liability company. Id. at 2-4. ADS provides submetering and billing services to landlords. Id. at 3. On January 3, 2011, ADS and Billing Associates signed an agreement (“Agreement”) for Billing Associates to sell ADS's services to Washington landlords. Id. The Agreement provides that Texas law applies to all legal issues. See Dkt. #36-1. ADS provided services to landlords by allocating property-wide utility bills between each tenant, billing each tenant for their share, and collecting payments on behalf of the landlords. See Dkt. #29 at 4. Pursuant to the Agreement, ADS was to deposit the payments received into a Trust Account, and transfer its apportioned fees to its Operating Account. Id. ADS was owned and managed by the other Defendants in the case (“Remaining Defendants”). See Dkt. #1 at 6. On June 20, 2014, Billing Associates terminated the Agreement due to alleged ADS breaches. Id. at 4. ADS filed for Chapter 7 Bankruptcy on July 18, 2014. Id. at 5. Subsequently, an automatic stay was ordered, and a Chapter 7 Trustee (“Trustee”) was appointed. Id. at 6. Billing Associates filed a claim in the bankruptcy proceeding. A Settlement Agreement was reached in May 2015, in which Billing Associates' unsecured claims in the bankruptcy case were liquidated and parties agreed to a mutual release of all claims (“Release”). See Dkt. #36-4. During the bankruptcy proceedings, Billing Associates suspected that ADS may have transferred funds from the Trust Account to its Operating Account and Remaining Defendants. See Dkt. #1 at 6. Billing Associates asserts that it could not investigate this further due to the automatic stay, which was in place until December 27, 2016. Id. After the stay was lifted, Plaintiff received further information revealing that ADS transferred funds for its own benefits and the Remaining Defendants, instead of reimbursing the landlords and Billing Associates. See Dkt. #29 at 9.

The bankruptcy case was reopened in mid-2020 at Billing Associates' request, asserting that its claims against Remaining Defendants were not listed in the initial petition. Id. On May 12, 2021, the Bankruptcy Court approved the sale of all of ADS's claims previously not administered and subsequently a final report was filed on November 17, 2021. See Dkt. #36-5. The Bankruptcy Court closed the case for a second time on August 10, 2022. See Dkt. #36-7. Plaintiff now sues ADS and Remaining Defendants, claiming they breached a fiduciary duty owed to Billing Associates and that the Remining Defendants aided and abetted in ADS's breach. See Dkt. #29.

III. DISCUSSION

A. Legal Standard under Rule 12(b)(6)

In making a 12(b)(6) assessment, the court accepts all facts alleged in the complaint as true, and makes all inferences in the light most favorable to the non-moving party. Baker v. Riverside County Office of Educ., 584 F.3d 821, 824 (9th Cir. 2009) (internal citations omitted). However, the court is not required to accept as true a “legal conclusion couched as a factual allegation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). The complaint “must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Id. at 678. This requirement is met when the plaintiff “pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. The complaint need not include detailed allegations, but it must have “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. Absent facial plausibility, a plaintiff's claims must be dismissed. Id. at 570.

Where a complaint is dismissed for failure to state a claim, “leave to amend should be granted unless the court determines that the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986).

B. Settlement Agreement (“Release”)

ADS argues that Billing Associates fully released its claims by signing a settlement agreement and Release that were subsequently approved by the Bankruptcy Court. See Dkt. #35 at 8-9. The Release provides that TBA Groups, on behalf of Billing Associates, shall have “allowed, unsecured claims” in an amount specified, and that “TBA Groups, and the Trustee [for ADS] each release the others from any and all liabilities, [and] claims ... arising on or before the Effective Date.” See Dkt. #36-2 at 3. This Release was subject to the Bankruptcy Court's approval, which followed in 2015. See Dkt. #36-4 at 2.

First, Billing Associates argues that the Release is an affirmative defense that is improper at this stage. See Dkt. #38 at 5. Second, Billing Associates asserts that ADS was not a named party to the settlement agreement and Release, reasoning that a Trustee who administers a Chapter 7 Bankruptcy estate is not the debtor business entity. Id. at 6. Third, Billing Associates states that the Release was not signed by the Trustee. Id. Finally, Billing Associates claims that a footnote in the Release exempts the claims pursued herein. Id.

The Court is not persuaded by Billing Associates' arguments. Dismissal under Rule 12(b)(6) is appropriate when the “asserted claims are barred by a release or other provision in a prior settlement agreement between the litigants. In re Shoot the Moon, LLC, 635 B.R. 568, 574 (Bankr. Mont. 2022) (citing Skilstaf, Inc. v. CVS Caremark Corp., 669 F.3d 1005, 1008 (9th Cir. 2012)). Billing Associates' second and third arguments are factual allegations couched as legal conclusion without citing any authority and are thus not persuasive. In reviewing the Release, the Trustee had the right to settle the claims against ADS, and upon the Bankruptcy Court's approval, the Release was “final and unappealable.” See Dkt. #36-2 at 3. Billing Associates' final argument related to the carve out in the footnote is also not sufficiently pled and argued. The footnote provides that the Release has no impact on “post-petition access to the estate's database,” exempting “any related claims against the bankruptcy estate.” Id. Under both Texas and Washington law, unambiguous agreements such as this Release are interpreted as “expressed in writing” as a matter of law. See Kachina Pipeline Co. v. Lillis, 471 S.W.3d 445, 449 (Tex. 2015); see also Allstate Ins. Co. v. Huston, 123 Wn.App. 530, 541-42, 94 P.3d 358, 364 (2004). Again, Billing Associates provides no factual assertions or legal authority to explain why its claims related to ADS's pre-petition actions-“that ADS transferred the Utility Consumption Charges from the Trust Account without the Landlords' direction”-fall under this post-petition carveout. See Dkt. #29 at 10. For these reasons, Billing Associates has failed to state a claim of breach of fiduciary duty against Defendant ADS and dismissal under Rule 12(b)(6) is proper.

C. Statute of Limitations

ADS next moves to dismiss based on the statute of limitations. It notes that Billing Associates learned of the facts alleged herein during ADS's bankruptcy and failed to assert these claims in multiple venues, now filing this case four years after the initial dismissal of ADS's bankruptcy. See Dkt. #35 at 6. Billing Associates does not dispute that the statute of limitations for a breach of fiduciary duties is four years, or that it first learned of the breach during ADS's bankruptcy. See Dkt. #38 at 4. It does argue, however, that the statute of limitations is equitably tolled because the bankruptcy automatic stay prevented it from commencing action against ADS. Id. (citing Hughes v. Mahoney & Higgins, 821 S.W.2d 154, 157 (Tex. 1991)).

“[E]quitable tolling pauses the running of, or ‘tolls,' a statute of limitations when a litigant has pursued his rights diligently but some extraordinary circumstance prevents him from bringing a timely action.” Lozano v. Montoya Alvarez, 572 U.S. 1, 10 (2014). Equitable tolling typically applies where a claimant missed a filing...