Cook ex rel. Maya's Meals v. Toidze

• Decision Date: 13 June 2013
• Docket Number: Civil Action No. 3:07–CV–0712 JCH.
• Citation: 950 F.Supp.2d 386
• Court: U.S. District Court — District of Connecticut
• Parties: Peter G. COOK, Thea Duvall, and Aleksandar Milosavljevic–Cook, Individually and on behalf of Maya's Meals, Plaintiffs, v. Maya TOIDZE, Alexandre Ivankine, Tim Toidze and Alezandre Avroutine, Defendants.

950 F.Supp.2d 386

Peter G. COOK, Thea Duvall, and Aleksandar Milosavljevic–Cook, Individually and on behalf of Maya's Meals, Plaintiffs,

v.Maya TOIDZE, Alexandre Ivankine, Tim Toidze and Alezandre Avroutine, Defendants.

Civil Action No. 3:07–CV–0712 JCH.

United States District Court,

D. Connecticut.

June 13, 2013.

Richard P. Colbert, Day Pitney LLP, Stamford, CT, for Plaintiffs.

RULING RE: MOTION FOR RECONSIDERATION AS TO MOTION FOR JUDGMENT PURSUANT TO RULES 55(c) and 60(b) (Doc. No. 164)

JANET C. HALL, District Judge.

I. INTRODUCTION

Plaintiffs Peter Cook (“Cook”), Thea Duell (“Duell”), and Aleksandar Milosavlievic–Cook (“Milosavlievic–Cook”) brought suit, both individually and derivatively on behalf of Maya's Meals, LLC, against defendants Maya Toidze, Alexandre Ivankine (“Ivankine”), Tim Toidze, and Alexandre Avroutine (“Avroutine”). The parties reached a settlement agreement, which ultimately fell apart, after which the plaintiffs filed an Amended Complaint—and later Substituted Complaint—against the defendants. See (Doc. Nos. 95, 108). After the filing of the Amended Complaint, only Avroutine appeared; and the plaintiffs then moved for default against the other three defendants. ¹See (Doc. No. 120). Default judgment was entered against Maya Toidze, Ivankine, and Tim Toidze (collectively, “defaulted defendants”) on November 21, 2011. See (Doc. No. 159).

Almost a year later, the defaulted defendants filed a Motion for Reconsideration as to the Order on the plaintiffs' Motion for Judgment. See (Doc. No. 164). The defaulted defendants argued that, pursuant to Rules 55(c) and 60(b) of the Federal Rules of Civil Procedure, the default judgment was void because the plaintiffs failed to serve them in accordance with the Hague Convention and because Maya's Meals was not registered to do business in Connecticut. Sua sponte, the court also raised whether the default judgment was void for lack of subject matter jurisdiction. See (Doc. No. 197).

II. BACKGROUND

Maya's Meals is a limited liability company with Cook, Duell, Milosavlievic–Cook, Maya Toidze, Ivankine, Tim Toidze, and Avroutine as members.² Subst. Compl. ¶¶ 2–9. The Substituted Complaint alleges that Maya Toidze entered into an Assignment and Agreement to transfer to Maya's Meals certain intellectual property rights, including a system for producing dough; food technology related to crepes, frozen soup, and entrees; and recipes to create various food products. Subts. Compl. ¶¶ 17–18. On or about February 16, 2006, Maya's Meals entered into a joint venture with Advance Food Company to form Maya's & Co. Foods, LLC. Subst. Compl. ¶ 19. As part of this venture, Maya's Meals licensed the joint venture to use its food technology to produce non-organic hand-held meals and snacks. Subst. Compl. ¶ 22. The joint venture also entered into various consulting and manufacturing agreements to prepare the food products. Subst. Compl. ¶¶ 25–27. However, Maya Toidze did not transfer the intellectual property rights and the joint venture declined to renew one of their consulting agreements because of it. Subst. Compl. ¶¶ 28–29. Maya Toidze finally transferred four of the approximately 27 recipes to the joint venture in October 2006. Subst. Compl. ¶ 30. Although Cook, as Chairman of the Board of Maya's Meals, and Greg Allen, Vice President of the joint venture, requested that Maya Toidze transfer the remaining recipes, Maya Toidze failed to do so. Subst. Compl. ¶¶ 31–34.

Maya Toidze, Ivankine, and Avroutine demanded that the joint venture pay for their travel to attend a meeting on behalf of the joint venture around October 2006. Subst. Compl. ¶¶ 39–46. When the joint venture failed to authorize the travel, they attended anyway and Maya Toidze resigned as Vice President of the Joint Venture, seemingly in protest. Subst. Compl. ¶¶ 41–42. In November 2006, the members of Maya's Meals issued a capital contribution call, but Maya Toidze and Ivankine failed to pay their pro rata share. Subst. Compl. ¶ 50. Further, in March 2007, Maya Toidze, in concert with Cook's ex-wife, transferred 6.5% of Cook's membership interest to his ex-wife. Subst. Compl. ¶¶ 55–59. In that same month, the defendants claimed to pass two resolutions to (1) remove Cook as manager of Maya's Meals and appoint Avroutine as manager and (2) amend the Operating Agreement, despite the fact that the resolutions were not affirmed by the appropriate percentage of members. Subst. Compl. ¶¶ 63–65.

After the parties entered into a Stipulated Agreement to resolve the above matters, the defendants failed to finally negotiate and complete the agreement and failed to respond to critical matters facing the joint venture. Subst. Compl. ¶¶ 78–83. Subsequently, the joint venture was dissolved in December 2009 after having sold its assets to satisfy its creditors. Subst. Compl. ¶ 85.

The plaintiffs filed an Amended Complaint on September 8, 2010. See (Doc. No. 95). The plaintiffs moved to enter a default judgment against the defendants on September 27, 2010, see (Doc. No. 96), to which Maya Toidze attempted to respond on behalf of herself, Tim Toidze, and Ivankine. See (Doc. Nos. 101–104). The plaintiffs filed a Substituted Complaint on November 8, 2010. See (Doc. No. 108). The court denied the plaintiffs' Motion for Default because the Substituted Complaint included a new claim for relief, which meant the plaintiffs needed to re-serve the Substituted Complaint on the defendants in accordance with Rule 5(a)(2) of the Federal Rules of Civil Procedure. See (Doc. No. 109). The plaintiffs moved again for a default judgment as to Maya Toidze, Tim Toidze, and Ivankine on November 29, 2010, see (Doc. No. 114), after the plaintiffs filed proof of service with the court, see (Doc. No. 110). However, the court directed the plaintiffs to provide proof of service in accordance with the Hague Convention. See (Doc. No. 115). The plaintiffs filed proof of service by registered mail, see (Doc. No. 117), after which the court entered default judgment on November 21, 2011. See (Doc. No. 159).

III. STANDARD OF REVIEW

Rule 60(b) identifies several reasons for which a party may be relieved from judgment:

(1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59(b); (3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party; (4) the judgment is void; (5) the judgment has been satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application; or (6) any other reason justifying relief from the operation of the judgment.

Fed.R.Civ.P. 60(b). The Rule further provides that the motion be made “within a reasonable time, and for reasons (1), (2), and (3) not more than one year after the judgment, order, or proceeding was entered or taken.” Id.

IV. DISCUSSION

The default defendants filed their Motion for Reconsideration based on their contention that the default judgment was void because (1) the plaintiffs failed to serve the Substituted Complaint on them in accordance with the Hague Convention as required by Rule 5(a)(2); and (2) the court lacked subject matter jurisdiction because Maya's Meals was not registered to do business in Connecticut.³

The court sua sponte raised whether the default judgment was void for lack of subject matter jurisdiction because the parties were not completely diverse. The Substituted Complaint does not include a basis for jurisdiction. However, the original Complaint (Doc. No. 1) states that the basis for jurisdiction is diversity of citizenship pursuant to section 1332 of title 28 of the United States Code. See Notice of Removal (Doc. No. 1) (“This Court possesses original jurisdiction of this matter pursuant to 28 U.S.C. § 1332). The plaintiffs brought this suit individually and derivatively on behalf of Maya's Meals, LLC. The individual plaintiffs are all residents of Connecticut. See Subst. Compl. ¶¶ 3–5. The defendants are residents of Canada. See Subst. Compl. ¶¶ 6–8. All are alleged to be members of Maya's Meals, LLC.

A limited liability company has the citizenship of its membership. Handelsman v. Bedford Village Associates Ltd. Partnership, 213 F.3d 48, 51 (2d Cir.2000) (stating that, while a plaintiff was a citizen of New York, as a representative of an LLP, he was deemed to have the citizenship of all the limited partners he represents). Therefore, Maya's Meals has the citizenship of each of its members: here, Connecticut and Canada. As such, the parties are not completely diverse.⁴

The plaintiffs argue that this lack of diversity does not void the default judgment for a number of reasons: (1) Maya's Meals was a nominal party that the court need not consider for diversity purposes; (2) even if diversity were lacking, it does not render the final judgment void under Rule 60(b)(4); (3) the court can reopen the judgment to correct an issue with diversity jurisdiction to uphold the final judgment; and (4) resolving diversity jurisdiction would not be futile because the court also had personal jurisdiction over the defendants when it entered the final judgment. See Pl. Suppl. Mem. (Doc. No. 201) at 1. The court will address each of these arguments.

A. Maya's Meals is not a nominal party

First, if the action at hand is a derivative suit, the limited liability company is not a nominal party. See Lenz v. Assoc. Inns. and Restaurants Co., 833 F.Supp. 362, 378 (S.D.N.Y.1993) (stating that, “in a derivative action brought by a limited partner, the limited partnership is an indispensable party”). However, it is not dispositive that the plaintiffs state that they are bringing claims derivatively. Id. at 379 (stating that, “it should be noted that in determining whether a claim is...