Jiang v. Zheng (In re Zheng), 21-13950-mkn

CourtUnited States Bankruptcy Courts. Ninth Circuit. U.S. Bankruptcy Court — District of Nevada
PartiesIn re: RUOMEI ZHENG, Debtor. v. RUOMEI ZHENG, Defendant. JIANJIE JIANG, Plaintiff,
Docket Number21-13950-mkn,Adv. Proc. No.: 21-01227-mkn
Decision Date25 March 2022

In re: RUOMEI ZHENG, Debtor.


RUOMEI ZHENG, Defendant.

No. 21-13950-mkn

Adv. Proc. No.: 21-01227-mkn

United States Bankruptcy Court, D. Nevada

March 25, 2022

Chapter 7

Date: January 12, 2022

Time: 9:30 a.m.


Hon. Mike K. Nakagava United States Bankruptcy Judge

On January 12, 2022, the court heard the Motion to Dismiss Jianjie Jiang's Complaint Objecting to Dischargeability of Debt Pursuant to 11 U.S.C. §523(A)[sic](2), (4), (6) and (19) ("Dismissal Motion"), brought on behalf of defendant Ruomei Zheng ("Debtor"), in the above-


captioned adversary proceeding. The appearances of counsel and the parties were noted on the record. After arguments were presented, the matter was taken under submission.


On August 10, 2021, Debtor filed a voluntary Chapter 7 petition. (ECF No. 1). The case was assigned for administration to Chapter 7 panel trustee Brian D. Shapiro.

On November 10, 2021, Jianjie Jiang ("Plaintiff") filed a complaint against the Debtor commencing the above-captioned adversary proceeding ("Complaint"). (AECF No. 1). Plaintiff seeks a determination that a certain investment-related debt owed by the Debtor is excepted from a Chapter 7 discharge under Section 523(a).[3]

On November 15, 2021, an order of discharge was entered with respect to all other debts. (ECF No. 25).


On December 10, 2021, Debtor filed the instant Dismissal Motion under Civil Rule 12(b)(7) and Civil Rule 12(b)(7). (AECF No. 8). Under the former, Debtor asserts that the Complaint must be dismissed under Civil Rule 19 because it fails to join an indispensable party. Under the latter, Debtor asserts that dismissal of the Complaint under Civil Rule 12(b)(6) is required because it fails to state a claim for which relief may be granted. The Dismissal Motion was noticed to be heard on January 12, 2022. (AECF No. 9).

On December 23, 2021, Plaintiff filed her opposition to the Dismissal Motion ("Opposition"). Attached to Plaintiff's Opposition is a declaration of her attorney, David Liebrader ("Liebrador Declaration"). (AECF No. 12).

On January 4, 2022, Debtor filed a response to the Opposition ("Reply"). (AECF No. 14).


A. Failure to Join an Indispensable Party under Civil Rule 19.

Pursuant to Civil Rule 12(b)(7), a party may move to dismiss a case for "failure to join a party under Rule 19." See Fed.R.Civ.P. 12(b)(7). The moving party for a Civil Rule 12(b)(7) motion to dismiss bears the burden of producing evidence in support of the motion. See Nat'l Loan Acquisitions Co. v. Niswonger, 2021 WL 2948887, at *2 (E.D. Cal. July 14, 2021). A motion to dismiss under Civil Rule 12(b)(7) demands a practical, and fact-specific inquiry. See Camacho v. Major League Baseball, 297 F.R.D. 457, 461 (S.D. Cal. 2013) (external citation omitted). Id. The court may consider additional evidence outside the pleadings when making a Civil Rule 19 determination. Id.

Civil Rule 19 entails a three-step inquiry: (1) is the absent party necessary (i.e., required to be joined if feasible) under Civil Rule 19(a)?; (2) if so, is it feasible to order that absent party to be joined?; and (3) if joinder is not feasible, can the case proceed without the absent party, or is the absent party indispensable such that the action must be dismissed? See Salt River Project Agr. Imp. & Power Dist. v. Lee, 672 F.3d 1176, 1179 (9th Cir. 2012). Under the three-step analysis for Civil Rule 19, the court must first determine whether the absent party is necessary, and if so, the court would then move on to steps two and three. See In re DBSI Inc., 2013 WL 1498365, at *4 (Bankr. D. Idaho Apr. 11, 2013).


"Thus, dismissal of a case is required only if the party is necessary, cannot be joined, and is indispensable." Id. at *4 (emphasis in original) (external citation omitted).

A party is considered necessary when: (1) complete relief cannot be granted in the party's absence; or (2) the district court determines that the absent party's participation is necessary to protect its legally cognizable interests or to protect other parties from a substantial risk of incurring multiple or inconsistent obligations because of those interests. See Camacho v. Major League Baseball, 297 F.R.D. 457, 461 (S.D. Cal. 2013) (external citation omitted). "Such a legally cognizable interest must be more than a financial stake in the outcome of the litigation." Id.

B. Failure to State a Claim for Relief under Civil Rule 12(b)(6).

A defendant may obtain dismissal of a claim alleged in a complaint under Civil Rule 12(b)(6) if the relevant claim alleged in the complaint lacks a cognizable legal theory or lacks sufficient facts to support a cognizable legal theory. See Taylor v. Bosco Credit LLC, 840 Fed.Appx. 125, 126 (9th Cir. 2020); see also Los Angeles Lakers, Inc. v. Fed. Ins. Co., 869 F.3d 795, 800 (9th Cir. 2017). In considering a motion under Civil Rule 12(b)(6), the court accepts as true all factual allegations made by, and draws all reasonable inferences in favor of, the plaintiff. See Barnes v. Belice (In re Belice), 461 B.R. 564, 573 (B.A.P. 9th Cir. 2011). An adversary complaint can survive a dismissal motion if the complaint alleges sufficient factual matter to "state a claim to relief that is plausible on its face." Curb Mobility, LLC v. Kaptyn, Inc., 434 F.Supp.3d 854, 858 (D. Nev. 2020) quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

This plausibility standard requires more than the mere possibility that the defendant is liable to the plaintiff. See Nationstar Mortgage, LLC v. Maplewood Springs Homeowners Ass'n, 238 F.Supp.3d 1257, 1265 (D. Nev. 2017) ("When a complaint pleads facts that are merely consistent with a defendant's liability, and shows only a mere possibility of entitlement, the complaint does not meet the requirements to show plausibility of entitlement to relief.") (external citation omitted). Formulaic recitations of the elements of a claim for relief are insufficient by themselves to meet the plausibility standard. Id. at 1265.


Finally, where amendment to the subject complaint would be futile, dismissal without leave to amend may be appropriate. See Ramachandran v. Best & Krieger, 2021 WL 428654, at *4 (N.D. Cal. Feb. 8, 2021). Amendment is futile when it is clear that amendment would not remedy the complaint's deficiencies. Id.


By the instant motion, Debtor now seeks to dismiss this Adversary Proceeding based on the unavailability of her former husband and the sufficiency of the factual allegations in the Complaint. The court will first address Debtor's arguments under Civil Rule 12(b)(7) which allows a civil complaint to be dismissed if it fails to join a party under Civil Rule 19.

1. Failure to Join an Indispensable Party.

Debtor argues that Sun, her former husband and a non-party to this case, is a necessary party because he has a "significant interest in the action." See Dismissal Motion at 5:21-22. She asserts that Sun's absence leaves Debtor with a "substantial risk of incurring double, multiple or otherwise inconsistent obligations because of his interest in the matter." Id. at 5:22-24. Debtor maintains that Sun was the primary force behind CLT LP/Silver State and the subsequent, related business operations. Id. at 5:24-27. She alleges that she has never spoken with or met Plaintiff and maintains that she was not involved in any executive or operational decisions regarding the companies. Id. at 5:27-28. Debtor argues that joinder of Sun is not feasible since his whereabouts are currently unknown and it is believed he may have fled the country. Id. at 6:5-8. She asserts that a judgment rendered in Sun's absence would be unconscionable to her and cause her prejudice, and somehow would deprive Sun of due process. Id. at 6:10-12. Debtor included several exhibits attached to the Dismissal Motion to support her assertions.[4] As previously mentioned, on a motion brought under Civil Rule 12(b)(7), the court can consider evidence


outside of the pleadings. See Camacho v. Major League Baseball, 297 F.R.D. at 461, citing McShan v. Sherrill, 283 F.2d 462, 464 (9th Cir.1960) ('To determine whether Rule 19 requires the joinder of additional parties, the court may consider evidence outside the pleadings.').

In response, Plaintiff argues that she already obtained a judgment against Sun in the State Court Action, and therefore she has no reason to name him as a party in the instant adversary proceeding. See Opposition at ¶ 5. She argues that the Debtor was a "control person" for CLT LP and Silver State within the meaning of state and federal law, and that Debtor's name was on certain documents regarding the entities that participated in the CLT project. Id. at 3:19-23;4:1-3. Plaintiff further argues that Sun is not necessary for a determination of whether the Debtor was a control person for the Chateau Les Trois entities, but that the documentary evidence and testimony will establish her as the control person. Id. at 4:15-18.

After careful consideration of the facts and circumstances, the court concludes that Sun is not a necessary party to this case. As a result, further analysis under Civil Rule 19 is unnecessary. This conclusion was made based on several reasons. First, the alleged facts in the Complaint, the supporting documents accompanying the Opposition, the State Court judgment against Sun, and the Dismissal Motion in general, all point to Debtor's involvement in some way in the entities created for the CLT project. Compare In re DBSI Inc., 2013 WL 1498365, at *8 ("The absence of an entity that is separately or independently liable does not generally impede the defense of present defendants.") (external citation omitted). Second, while this case is...

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