CKH Family Ltd. v. Holt Homes, Inc.
| Decision Date | 29 January 2018 |
| Docket Number | Case No. 3:17–cv–441–SI |
| Parties | CKH FAMILY LIMITED PARTNERSHIP, et al., Plaintiffs, v. HOLT HOMES, INC., et al., Defendants. |
| Court | U.S. District Court — District of Oregon |
Leslie S. Johnson, Darlene D. Pasieczny, Samuels Yoelin Kantor LLP, Christopher H. Kent, Kent & Johnson, LLP, Portland, OR, for Plaintiffs.
Phillip J. Haberthur, Bradley W. Andersen, Landerholm, PS, Vancouver, WA, for Defendants.
In 2005, Plaintiffs Waldemar Maya, Van Shaw, and CKH Family Limited Partnership invested a total of $1.4 million in a real estate development plan orchestrated by Defendant Greg Kubicek. Plaintiffs are now suing Kubicek and three entities associated with Kubicek for: (1) rescission under Oregon Revised Statutes ("ORS") § 59.115(2) ; (2) misrepresentation; (3) breach of fiduciary duty by self-dealing; and (4) aiding and abetting an unlawful sale of securities in violation of ORS § 59.115(3). Before the Court are the parties' cross-motions for summary judgment. For the reasons discussed, Defendants' motion for summary judgment is granted, and Plaintiffs' motion for summary judgment is denied as moot.
A party is entitled to summary judgment if the "movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The moving party has the burden of establishing the absence of a genuine dispute of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The court must view the evidence in the light most favorable to the non-movant and draw all reasonable inferences in the non-movant's favor. Clicks Billiards Inc. v. Sixshooters Inc. , 251 F.3d 1252, 1257 (9th Cir. 2001). Although "[c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge ... ruling on a motion for summary judgment," the "mere existence of a scintilla of evidence in support of the plaintiff's position [is] insufficient...." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 252, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citation and quotation marks omitted).
When parties file cross-motions for summary judgment, the court "evaluate[s] each motion separately, giving the non-moving party in each instance the benefit of all reasonable inferences." A.C.L.U. of Nev. v. City of Las Vegas , 466 F.3d 784, 790–91 (9th Cir. 2006) (quotation marks and citation omitted); see also Pintos v. Pac. Creditors Ass'n , 605 F.3d 665, 674 (9th Cir. 2010) (). In evaluating the motions, "the court must consider each party's evidence, regardless under which motion the evidence is offered." Las Vegas Sands, LLC v. Nehme , 632 F.3d 526, 532 (9th Cir. 2011). "Where the non-moving party bears the burden of proof at trial, the moving party need only prove that there is an absence of evidence to support the non-moving party's case." In re Oracle Corp. Sec. Litig. , 627 F.3d 376, 387 (9th Cir. 2010). Thereafter, the non-moving party bears the burden of designating "specific facts demonstrating the existence of genuine issues for trial." Id. "This burden is not a light one." Id. The Supreme Court has directed that in such a situation, the non-moving party must do more than raise a "metaphysical doubt" as to the material facts at issue. Matsushita , 475 U.S. at 586, 106 S.Ct. 1348.
Plaintiffs are CKH Family Limited Partnership ("CKH"), a Texas limited partnership, and two individuals: Waldemar Maya and Van Shaw. Shaw is an attorney in Texas. Maya is a business associate of Doug Hickok, who is the general partner and principal of CKH. Defendants are Holt Homes, Inc. ("Holt Homes"), a Washington Corporation; Clackamas Homes, Inc. ("CHI"), an Oregon Corporation; MGD/CCP Acquisition LLC ("the Company"), an Oregon limited liability company; and Greg Kubicek. ECF 1–1 at 39, ECF 5 at 2. CHI is the manager of the Company, and Holt Homes is an affiliate of CHI. ECF 1–1 at 39 ¶ 4, ECF 5 at 2 ¶ 4. Kubicek is the sole shareholder of both CHI and Holt Homes. ECF 5 at 2 ¶ 5.
Kubicek formed the Company in August 2005 for the purpose of acquiring a portfolio of properties in Clackamas County, Oregon from retiring developers Don and Maria Oakley. ECF 1–1 at 39 ¶ 2, ECF 5 at 2 ¶ 2. The properties at issue were held by two of the Oakleys' limited liability companies—MGD Properties, LLC ("MGD") and Cascade Community Properties, LLC ("CCP"). ECF 15 at 2 ¶ 3.
Kubicek planned to develop the properties and presented Plaintiffs with the opportunity to invest in the development. Kubicek detailed his prior development experience to the prospective investors. Kubicek also issued a Private Placement Memorandum ("PPM"), which described plans for the acquisition and development of the properties. ECF 5 at 3, ¶ 8; ECF 15 at 2–3, ¶ 7. Between late September and early October, 2005, Plaintiffs collectively invested $1.4 million in the Company. CKH invested $750,000, Maya invested $150,000, and Shaw invested $500,000. Each of the Plaintiffs signed a Subscription Agreement, agreeing to the terms and conditions of an Operating Agreement that would govern the operation of the Company. ECF 15–5; ECF 17 (Operating Agreement). After Kubicek formed the Company, the Company acquired 99 percent of MGD and CCP. ECF 15 at 2 ¶ 6. CHI, of which Kubicek was the sole owner, and which Kubicek formed to manage the Company, owned the remaining one percent of MGD and CCP. Id.
The Company acquired the properties on or about October 3, 2005. ECF 17 at 254. Shortly before the acquisition, the Company had collected just under $6 million in outside investment. ECF 17 at 156. According to Defendants, Kubicek had reason to believe, based on promises from investors, that the Company would raise $9,500,000, which Kubicek had represented was needed. ECF 15 at 4.
To close the deal, Holt Homes loaned the Company $3,606,984.40 ("the Holt Homes loan"). ECF 15 at 4. According to Defendants, this loan was intended to bridge the gap between the money already invested (just under $6 million) and money that had been committed but not yet delivered (approximately $9.5 million). Id. According to Defendants, after investors contributed their committed funds, the Company repaid Holt Homes from those funds. Holt Homes did not charge interest on this loan. Payments to Holt Homes were made between November 16, 2005 and December 23, 2005. By this point, the balance owed on the Holt Homes loan was reduced to $406,984. ECF 15 at 4. The Holt Homes loan was completely repaid by 2006. ECF 17 at 190.
The Company ultimately sold ten of the individual property developments between October 2005 and 2014. ECF 15 at 5, ¶ 18. In 2006, the Company made one capital distribution, in the amount of ten percent, to the investors. ECF 5 at 4, ¶ 15. The Company did not, however, achieve the success that Kubicek or the investors had hoped. ECF 5 at 4, ¶ 15. Defendants blame this on the economic recession of 2007. ECF 15 at 5, ¶ 18. According to Kubicek, after the start of the recession the Company completed and sold as many lots and homes as it could, and held on to other assets and options to purchase other properties in the hope that the Company could weather the storm. ECF 15 at 5, ¶ 19.
Between 2003 and 2015, the Company issued 17 or 18 "member updates." ECF 15–9. The first report made to investors came in February 2006. The update contained a balance sheet that listed, as a line item, $406,984 owed to Holt Homes. Id. at 6, 8. It also indicated that Holt Homes had previously been owed $1,506,984, and had been paid $1,100,000 in the period ending December 31, 2005. According to Plaintiffs, Hickok made several attempts, over the course of twelve years, to obtain more detailed financial information from the Company. ECF 18 at 2, ¶ 4. At one point, Krista Harvill–Sorter, the chief financial officer for the Holt Group, sent Mr. Hickok several internal financial statements. Id.
On June 21, 2010, Kubicek issued a capital call seeking additional investor funds. Hickok traveled to Oregon to tour the properties and meet with Kubicek. ECF 18 at 3, ¶ 5. Hickok asked Kubicek to send additional documents, but Hickok never received those documents. ECF 18 at 3, ¶ 5. After Hickok's visit, Plaintiffs decided not to respond to the capital call. Since its formation, the Company has reported at least $23 million in revenue from sales of the acquired properties. Of that, $800,000 has been paid to outside investors—all of which was in the single 2006 distribution. ECF 5 at 4, ¶ 15–16.
On January 18, 2011, Shaw sued the Company and Kubicek in Dallas County, Texas on behalf of his then-clients, CKH and Maya ("the Texas lawsuit"). ECF 14–4. The Texas lawsuit alleged intentional misrepresentation, fraud, breach of fiduciary duty, and conspiracy, all in connection with the Plaintiffs' investments in the Company. Id. The Company entered a special appearance, arguing that Texas was an improper venue, because the Operating Agreements required that any lawsuit be filed in Oregon and that any dispute was subject to mandatory arbitration. ECF 15 at 6 ¶ 21; CKH Family Ltd. P'ship v. MGD/CCP Acquisition, LLC , 2013 WL 5614304, at *1 (Tex. App. Oct. 14, 2013).
In March, the plaintiffs in the Texas lawsuit sought discovery, including documents, answers to interrogatories, and depositions. ECF 22 at 20. Defen...
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