Mansha Consulting LLC v. Alakai
| Decision Date | 23 August 2017 |
| Docket Number | Civ. No. 16-00582 ACK-RLP |
| Parties | MANSHA CONSULTING LLC, Plaintiff, v. CLIFF ALAKAI, et al., Defendants. |
| Court | U.S. District Court — District of Hawaii |
ORDER GRANTING DEFENDANT TOM MATSUDA'S MOTION TO DISMISS FIRST AMENDED COMPLAINT FILED MARCH 17, 2017, DEFENDANT CLIFF ALAKAI'S PRE-ANSWER MOTION TO DISMISS FIRST AMENDED COMPLAINT FILED ON MARCH 17, 2017, AND DEFENDANT JEFFREY KISSEL'S SUBSTANTIVE JOINDER TO DEFENDANT MATSUDA'S AND DEFENDANT ALAKAI'S MOTIONS TO DISMISS FIRST AMENDED COMPLAINT FILED ON MARCH 17, 2017
For the reasons set forth below, the Court GRANTS Defendant Tom Matsuda's Motion to Dismiss First Amended Complaint Filed March 17, 2017 (ECF No. 37), Defendant Cliff Alakai's Pre-Answer Motion to Dismiss First Amended Complaint Filed on March 17, 2017 (ECF No. 40), and Defendant Jeffrey Kissel's Substantive Joinder to Defendant Tom Matsuda's Motion to Dismiss First Amended Complaint Filed March 17, 2017 and to Defendant Cliff Alakai's Pre-Answer Motion to Dismiss the First Amended Complaint Filed on March 17, 2017 (ECF No. 41). The Court dismisses all counts in the First Amended Complaint WITH PREJUDICE, and Plaintiff's First Amended Complaint is hereby DISMISSED.
FACTUAL BACKGROUND
In 2010, the Affordable Care Act ("ACA") required states to establish health exchanges to facilitate, for individuals and entities, the selection, purchase, and enrollment in private health insurance plans. First Amended Complaint ("FAC") ¶ 11, ECF No. 36. As a result, the State of Hawaii established the Hawaii Health Connector ("HHC" or the "Connector"), the State's health insurance exchange. Id. ¶ 12. To assist with its obligations, and in particular, to implement necessary information technology programs and systems, HHC retained Plaintiff Mansha Consulting, LLC ("Mansha" or "Plaintiff"). Id. ¶¶ 10, 14, 15.
Mansha entered into a contract with HHC (the "IPMO Contract") which totaled over 21 million dollars. Id. ¶ 15. The IPMO Contract was funded through grants from the federal government, and accordingly, payment to Mansha was to be supplied by the Centers for Medicare and Medicaid Services ("CMS"), the responsible federal agency. Id. ¶ 16.
Mansha began work under the IPMO contract on or around April 2013. Id. ¶ 17. Beginning with the invoice dated September 1, 2014 and thereafter, HHC failed to forward Mansha's invoices for payment. Id. ¶ 18. Following several months of unpaid invoices, each of which was in the amount of $677,842.61 plus excise taxes, Mansha on or around December of 2014, ceased further work under the IPMO Contract. Id. ¶ 19. From July 2014 to December 2014, Mansha continued its work under the contract based on statements and acts by the Defendants, who were directors and/or officers of HHC, that payment would be made to Mansha based on its invoices and erroneous reasons for non-payment. Id. ¶¶ 5-7, 19.
Eventually, HHC collapsed. Id. ¶ 20. Since HHC's collapse, Mansha has attempted to recover its losses by demanding compensation from HHC directly, retaining Counsel to address the matter with HHC, contacting CMS directly, and communicating with other relevant third parties. Id.
In relation to Defendants' actions in mishandling the invoice payments, Mansha alleges negligent misrepresentation, negligence, and breach of fiduciary duty claims against Defendants Tom Matsuda ("Matsuda") and Jeffrey Kissel ("Kissel") and a breach of fiduciary duty claim against Defendant Cliff Alakai ("Alakai"). Id. ¶¶ 22, 27, 32. As a result of these actions, Mansha claims, inter alia, that its value as a company has been diminished, a pending acquisition of Mansha was derailed, and that it has lost millions of dollars. Id. ¶¶ 25, 30, 42.
The FAC contains the following allegations against each of the Defendants.
Plaintiff only alleges a claim for breach of fiduciary duty against Defendant Alakai. Id. ¶ 32. Defendant Alakai was a member of the Board of Directors for HHC during the relevant time period and at some point might have served as a treasurer for the Board of Directors.1 Id. ¶ 33.2 Alakai knew or should have known that HHC became insolvent and had a duty to Mansha to, inter alia, avoid any actions that unduly risked assets which could be used to pay Mansha's claim. Id. ¶¶ 39-40. Mansha alleges that Alakai refused to forward Mansha's invoices for payment by CMS. Id. ¶ 40. Mansha alleges that because of this conduct Alakai was grossly negligent in carrying out his fiduciary duties to Mansha and breached his fiduciary duty to Mansha. Id. ¶¶ 41-42.
Plaintiff alleges negligent misrepresentation, negligence, and breach of fiduciary duty claims against Defendant Matsuda. Id. ¶¶ 22, 27, 32. Defendant Matsuda was the Interim Executive Director of HHC "from a date unknown" until approximately October 2014. Id. ¶ 23a. Matsuda was responsible for HHC's overall administration. Id. ¶ 23b.
As the basis for Plaintiff's negligent misrepresentation claim, Mansha alleges that Matsuda negligently misinformed Mansha that the invoices were not being forwarded to CMS because there was a restriction on funds initiated by either CMS or HHC. Id. ¶¶ 23d-e. Mansha later learned that although such a restriction may have existed for a short period of time, the restrictions had been cleared and its invoices could have been paid. Id. ¶ 23e. Matsuda also made erroneous assurances to Mansha that it would be paid on its submitted invoices, in effect urging Mansha to "hang in there." Id. ¶ 23f. As a result of this misinformation, Mansha forwent action which it otherwise would have taken and which could have prevented damage to Mansha. Id. ¶ 23g. Plaintiff further alleges that the duty owed by Matsuda to Mansha is imposed by Restatement (Second) of Torts § 552 to exercise reasonable care in obtaining or communicating information for the guidance of others in their business transactions. Id. ¶ 23j.
As the basis for its negligence claim against Matsuda, Plaintiff alleges that Matsuda owed Mansha a duty to take reasonable steps to prevent damage to Mansha which could foreseeably result from these negligent misrepresentations. Id. ¶¶ 28h-i. Because Matsuda failed to take any such action, he breached his duty to Mansha. Id. For its breach of fiduciary duty claim against Matsuda, Plaintiff makes the same allegations as it does against Defendant Alakai. Id. ¶¶ 39-42.
Plaintiff alleges negligent misrepresentation, negligence, and breach of fiduciary duty claims against Defendant Kissel. Id. ¶¶ 22, 27, 32. Defendant Kissel was HHC's Executive Director starting in October 2014 and was responsible for HHC's overall administration. Id. ¶¶ 24a-b. Plaintiff's claims against Kissel are substantially the same as Plaintiff's claims against Matsuda. See id. ¶¶ 24b-k, 29b-i, 39-42.
PROCEDURAL BACKGROUND
Plaintiff filed a Complaint against Defendants on October 28, 2016. ECF No. 1. The Complaint raised claims for negligence and negligent breach of fiduciary duty against all Defendants.3 Id. On December 5, 2016, Matsuda filed a Motion to Dismiss Complaint Filed October 28, 2016. ECF No. 12. Mansha filed its Opposition on December 30, 2016. ECF No. 19. Alakai and Kissel filed a Non-Substantive Joinder to Matsuda's Motion to Dismiss on December 30, 2016. ECF No. 21. Matsuda filed a Reply on January 20, 2017. ECF No. 26. On December 30, 2016, Alakai and Kissel also filed a Pre-Answer Motion to Dismiss Complaint Filed on October 28, 2016. ECF No. 20. Plaintiff filed its Opposition on January 13, 2017. ECF No. 25. Alakai and Kissel filed a Reply on January 20, 2017. ECF Nos. 27-28. On January 20, 2017 Matsuda filed a Non-Substantive Joinder to Defendants Alakai and Kissel's Reply. ECF No. 29. The Court held a hearing on both motions to dismiss on February 2, 2017. On February 16, 2017, the Court entered an Order granting Defendants' motions to dismiss the Complaint without prejudice ("February 16, 2017 Order"). ECF No. 34.
On March 17, 2017, Plaintiff filed its First Amended Complaint, alleging claims for negligent misrepresentation, negligence, and breach of fiduciary duty. ECF No. 36. As previously discussed, Plaintiff alleges all of these claims against Defendants Matsuda and Kissel but only breach of fiduciary duty against Defendant Alakai. Id.
On March 31, 2017, Defendant Matusda filed a Motion to Dismiss First Amended Complaint Filed March 17, 2017 ("Matsuda Motion"). ECF No. 37. On April 6, 2017, Defendant Alakai filed a Pre-Answer Motion to Dismiss First Amended Complaint Filed on March 17, 2017 ("Alakai Motion"). ECF No. 40. On that same date, Defendant Kissel filed a Substantive Joinder to Defendant Matsuda's Motion to Dismiss First Amended Complaint Filed March 17, 2017 and to Defendant Cliff Alakai's Pre-Answer Motion to Dismiss First Amended Complaint Filed on March 17, 2017 ("Kissel Joinder"). ECF No. 41.
On July 13, 2017, Plaintiff filed oppositions to Defendants' Motions and Kissel's Joinder ("Pl. Alakai Opp." and "Pl. Matusda Opp."). ECF Nos. 45, 46. On July 20, 2017, Defendants Matsuda and Alakai filed replies ("Matsuda Reply" and "Alakai Reply") to Plaintiff's oppositions. ECF Nos. 48, 50. Defendant Kissel also filed a reply in further support of his Joinder ("Kissel Reply"). ECF No. 49. The Court held a hearing on these Motions on August 3, 2017.4
STANDARD
Federal Rule of Civil Procedure 12(b)(6) authorizes the Court to dismiss a complaint that fails "to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). Rule 12(b)(6) is read in conjunction with Rule 8(a), which requires only "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). The Court may dismiss a complaint either because it lacks a cognizable legal theory or because it lacks sufficient factual allegations to support a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988).
In resolving a Rule 12(b)(6) motion, the Court must construe the complaint in the...
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