Cherry v. Strategic Props. of N. Am.

• Decision Date: 13 February 2023
• Docket Number: 2:22-cv-00999-DAD-DB
• Parties: JULIUS CHERRY, et al., Plaintiffs, v. STRATEGIC PROPERTIES OF NORTH AMERICA, LLC, et al., Defendants.
• Court: U.S. District Court — Eastern District of California

JULIUS CHERRY, et al., Plaintiffs, v. STRATEGIC PROPERTIES OF NORTH AMERICA, LLC, et al., Defendants.

No. 2:22-cv-00999-DAD-DB

United States District Court, E.D. California

February 13, 2023

ORDER GRANTING, IN PART, DEFENDANTS' MOTION TO DISMISS AND DENYING PLAINTIFFS' MOTION TO COMPEL AS HAVING BEEN RENDERED MOOT (DOC. NOS. 16, 17, 28)

This matter is before the court on defendants' motion to dismiss plaintiffs' complaint pursuant to Federal Civil Procedure Rules 12(b)(2), 12(b)(3), and 12(b)(6). (Doc. No 16.)^[1] On October 10, 2022, defendants' motion was taken under submission on the papers. (Doc. No. 24.) For the reasons set forth below, the court will grant defendants' motion to dismiss (Doc. No. 16), in part. The court will also deny plaintiffs' pending motion to compel arbitration (Doc No. 28) as having been rendered moot by this order.

BACKGROUND

On April 27, 2022, plaintiffs Julius Cherry and Gerard Glazer (collectively, “plaintiffs”) filed this action against defendants Strategic Properties of North America (“SPONA”), Saul Kuperwasser (collectively “defendants”), and Does 1-20 in the Sacramento County Superior Court. (Doc. No. 1-1 at 1.) On June 8, 2022, defendants removed this action to this federal court on the basis of diversity jurisdiction pursuant to 28 U.S.C. §§ 1332, 1441. (Doc. No. 1 at 2.) In their complaint, plaintiffs allege as follows.

Plaintiffs are owners of two residential units in a condominium building located at 10 E. Ontario Street in Chicago, Illinois (the “subject condominium”). (Doc. No. 1-1 at ¶ 2.) Plaintiffs reside in the Sacramento area and purchased their condominium units as “retirement/investment property.” (Id. at ¶¶ 2, 8.) Defendant SPONA is a Delaware limited liability company that purchases residential properties and is attempting to purchase the subject condominium. (Id. at ¶ 9.) Defendant Kuperwasser is a principal at SPONA. (Id. at ¶ 10.)

The subject condominium consists of 467 residential units. (Id. at ¶ 16.) All of the units and common elements in the subject condominium are owned by the unit owners, who constitute the members of the subject condominium's residential dwelling community, the Private Residences at Ontario Place Condominium Association (the “Condominium Association”). (Id. at ¶¶ 18, 20.)

On February 26, 2020, SPONA sent the subject condominium's Board of Managers (“BOM”) a letter of intent to purchase all 467 units and common spaces of the subject condominium. (Id. at ¶ 25.) In August 2020, the proposed sale failed to pass a vote by the unit owners of the subject condominium. (Id. at ¶ 29.) Subsequently, SPONA sent the BOM a second letter of intent to purchase the subject condominium, which was put to another vote before the subject condominium's unit owners-and again failed to pass-on August 26, 2021. (Id. at ¶¶ 30-31.) Despite the two failed attempts to pass the proposed sale of the subject condominium, SPONA “engaged in secret discussions” with members of the BOM, who “met privately to strategize about anyway [sic] to change the vote.” (Id. at ¶¶ 28, 31.) The members of the BOM then, “[w]ith the aid and assistance of SPONA,” extended the vote on the proposed sale through September 10, 2021. (Id. at ¶¶ 31-32.) The BOM and SPONA “railroaded this [extended] vote” and thus were able to “intentionally push through the sale.” (Id. at ¶ 32.)

On November 7, 2021, SPONA and the BOM entered into an Agreement of Purchase and Sale (“APS”) for the bulk sale of all units in the subject condominium, culminating in a “Fourth Amendment to Agreement of Purchase and Sale” entered into on March 18, 2022 (“amended APS”). (Id. at ¶¶ 39, 42.) Plaintiffs allege that the amended APS has extended the closing date on the proposed sale without plaintiffs' consent; plaintiffs do not wish to sell their units; and plaintiffs wish to use their own title company in connection with the sale, rather than use SPONA's choice of title company as set forth in the APS. (Id. at ¶¶ 43, 45.)

Based on the foregoing allegations, plaintiffs assert the following claims: (1) intentional infliction of emotional distress; (2) fraud and deceit; (3) conversion; and (4) elder abuse. (Id. at ¶¶ 62-91.) Plaintiffs seek damages and a judicial declaration that, inter alia, the APS is null and void and the proposed sale is canceled. (Id. at ¶¶ 49-61, 91.)

On April 27, 2022, plaintiffs initiated this action in the Sacramento County Superior Court. (Doc. No. 1-1 at 1.) Defendants removed this action to this court on June 8, 2022. (Doc. No. 1.) On August 31, defendants filed the pending motion to dismiss plaintiffs' complaint. (Doc. No. 16). On October 14, 2022, plaintiffs filed their opposition to the pending motion. (Doc. No. 25.) Defendants filed their reply thereto on November 4, 2022. (Doc. No. 26.)

LEGAL STANDARD

Under Rule 12(b)(2) of the Federal Rules of Civil Procedure, a defendant may move to dismiss an action for lack of personal jurisdiction. In opposing such a motion, the plaintiff bears the burden of proof to show that jurisdiction is appropriate. Picot v. Weston, 780 F.3d 1206, 1211 (9th Cir. 2015); Love v. Assoc. Newspapers, Ltd., 611 F.3d 601, 608 (9th Cir. 2010). When a defendant's motion to dismiss is based on written materials rather than an evidentiary hearing and is to be decided on the pleadings, affidavits, and discovery materials, the plaintiff need only make aprimafacie showing that personal jurisdiction exists in order for the action to proceed. See Ranza v. Nike, Inc., 793 F.3d 1059, 1068 (9th Cir. 2015); Picot, 870 F.3d at 1211.

In determining whether a plaintiff has established personal jurisdiction, the court accepts the plaintiff's allegations as true and resolves any conflicts between the parties over statements contained in affidavits in the plaintiff's favor. Love, 611 F.3d at 608; Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004). However, where allegations are controverted by a defendant, the plaintiff cannot “simply rest on the bare allegations of [the] complaint, but rather [is] obligated to come forward with facts, by affidavit or otherwise, supporting personal jurisdiction.” Philips v. Pitt Cnty. Mem'lHosp., Inc., 855 Fed.Appx. 324 (9th Cir. 2021)^[2] (quoting AmbaMktg. Sys., Inc. v. Jobar Int'l, Inc., 551 F.2d 784, 787 (9th Cir. 1977)).

“Where, as here, there is no applicable federal statute governing personal jurisdiction, the law of the state in which the district court sits applies.” Core-Vent Corp. v. Nobel Indus. AB, 11 F.3d 1482, 1484 (9th Cir. 1993). “California's long-arm statute allows courts to exercise personal jurisdiction over defendants to the extent permitted by the Due Process Clause of the United States Constitution.” Core-Vent Corp., 11 F.3d at 1484; see also Cal. Civ. Proc. Code § 410.10 (“A court of this state may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States.”). Thus, only constitutional principles constrain the jurisdiction of a federal court in California. Love, 611 F.3d at 608-09.

Under the Fourteenth Amendment's due process clause, courts may exercise personal jurisdiction over non-resident defendants only so long as there are sufficient “minimum contacts” between the defendant and the forum state “such that maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.'” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980) (quoting Int'lShoe Co. v. Washington, 326 U.S. 310, 316 (1945)). “Each defendant's contacts with the forum State must be assessed individually.” Calder v. Jones, 465 U.S. 783, 790 (1984).^[3] “The strength of contacts required depends on which of the two categories of personal jurisdiction a litigant invokes: specific jurisdiction or general jurisdiction.” Ranza, 793 F.3d at 1068.

ANALYSIS

In the pending motion to dismiss, defendants contend that: (1) this court lacks personal jurisdiction over them; (2) the Eastern District of California is an improper venue; and (3) plaintiffs fail to state any cognizable claims upon which relief can be granted.^[4] (Doc. No. 16 at 9, 15.)

A. Personal Jurisdiction Pursuant to Rule 12(b)(2)

Defendants contend that plaintiffs' complaint must be dismissed because this court lacks both general and specific personal jurisdiction over them. (Doc. No. 16 at 10.) In opposition, plaintiffs argue that this court may exercise personal jurisdiction over defendants. (Doc. No. 25 at 9.)

As an initial matter, the court rejects plaintiffs' argument that defendants have waived any objection to personal jurisdiction by their participation in this action up until this point. Plaintiffs first contend that by removing this action from state to federal court, defendants waived any objection to this court's exercise of personal jurisdiction over them. (See id.) While it is true that a defendant can waive an objection to personal jurisdiction by failing to raise it in a timely manner see Federal Rule of Civil Procedure 12(h), the “standard rule” is that “a defendant does not waive jurisdictional challenges by removing a case to federal court.” Munjy v. Destination XL Grp., Inc., No. 1:14-cv-01557-TLN-SKO, 2015 WL 1021129, at *3 (E.D. Cal. Mar. 9, 2015) (quoting Naxos Resources (U.S.A.) Ltd. v. Southam Inc., No. 2:96-cv-02314-WJR-MC, 1996 WL 662451, at *8 (C.D. Cal. Aug. 16, 1996)); see also Rivera v. Bally's Park Place, Inc., 798 F.Supp.2d 611, 615 (E.D. Pa. 2011) (noting that “removal to federal court does not constitute . . . a waiver” to a defendant's objection to personal jurisdiction); Arizona v. Manypenny, 451 U.S. 232, 242 n.17 (1981) (“[I]f the state court lacks jurisdiction over the subject matter or the parties, the federal court acquires none upon...