Marn v. McCully Assocs.
| Decision Date | 31 October 2013 |
| Docket Number | CIVIL NO. 12-00684 DKW/BMK |
| Parties | ALEXANDER Y. MARN, as an individual, et al. Plaintiffs, v. MCCULLY ASSOCIATES, a Hawai'i registered Limited Partnership, et al. Defendants. |
| Court | U.S. District Court — District of Hawaii |
ORDER GRANTING DEFENDANTS'
MOTIONS TO DISMISS
Before the Court are the following motions: (1) Defendants Thomas E. Hayes as Court Appointed and Liquidating Receiver, Alston Hunt Floyd & Ing, a Law Corporation, M Pocket Corporation, and Sofos Realty Corporation's Motion to Dismiss ("Receiver Motion"); and (2) Defendants James Y. Marn, Jr. and James K.M. Dunn's Motion to Dismiss ("Dunn Motion"). Defendants Hawaii 5-0 Properties, Inc., James Y. Marn, Jr., and James K.M. Dunn each filed joinders to the Receiver Motion. The Court held a hearing on the motions on September 13, 2013.After careful consideration of the supporting and opposing memoranda, the arguments of counsel, and the relevant legal authority, both the Receiver Motion and the Dunn Motion are hereby GRANTED.
The Court will not recount the history of the extensive and protracted litigation between these parties. Rather, the Court will summarize the factual and procedural background relevant to the pending motions to dismiss. Briefly, the present dispute is an extension of nearly fifteen years of state court litigation involving members of the Marn family and the management of their associated businesses.
McCully Associates ("MA") was formed in 1982 by members of the Marn family to hold and operate properties, including the McCully Shopping Center in Honolulu. Ala Wai Investment, Inc. ("AWI") was the general partner of MA and was owned equally by four Marn siblings, including Plaintiffs Alexander Y. Marn ("Alex") and Eric Y. Marn ("Eric"). See Receiver Motion at 5. Litigation commenced in Hawai'i state court in 1998 based on alleged mismanagement by Alex and Eric of the MA and AWI assets. The state court litigation was eventually consolidated as the "Marn Family Litigation," Civil No. 00-1-MFL. Over the span of the next decade of litigation supervised by the state court, the assets of MA andAWI were placed into receivership and eventually liquidated. Trial court proceedings in the Marn Family Litigation have largely ended, but as many as ten appeals by Alex and Eric are pending in the state appellate courts. Id. at 1-2.
Defendant Thomas E. Hayes ("Receiver") was appointed by the state Circuit Court as the receiver in the Marn Family Litigation. The Receiver was granted broad powers to operate and manage the business of MA and AWI as custodian. The Receiver retained Defendant Alston Hunt Floyd & Ing ("AHFI") to represent him in his official capacity, a retention that Alex unsuccessfully challenged in state court. Id. at 5-8.
Two bench trials were held in 2005 and 2006, which resulted in an April 30, 2008 Findings of Fact and Conclusions of law and an October 25, 2010 Partial Final Judgment. The state court ordered that MA and AWI be dissolved and awarded damages, fees, and punitive damages against Alex and Eric, the current balance of which exceeds $18,000,000. Id. at 10. In an October 9, 2008 order, the state court authorized the Receiver to sell the McCully Shopping Center and another property, the Lime Street Apartments. The Receiver sought and was granted court approval to offer each of the limited partners, including Eric and Alex, a limited first right to purchase the properties. The Receiver then accepted the highest offer, which was submitted by Alex and Eric. Alex and Eric, however, were not able toclose on the properties because their lender did not confirm that financing would be forthcoming. The Receiver consequently withdrew his approval and terminated a non-binding letter of intent. Id. at 12-13.
Thereafter, the Receiver marketed the properties and accepted an offer from Defendant M Pocket Corporation ("M Pocket") for $19,000,000. The state trial court confirmed the sale on March 28, 2012. On February 28, 2012, Alex filed a complaint in state court against the Receiver based on the sale of the McCully Shopping Center. That case was dismissed on July 9, 2012 based on the Receiver's immunity from suit. Id. at 13-14. On July 30, 2012, the state court deemed Alex a vexatious litigant pursuant to Hawaii Revised Statutes ("HRS") § 634J-1. Id. at 17.
On December 17, 2012, Plaintiffs Alex and Eric Marn in their individual capacities; Alex Marn and Ernestine Marn as Co-Trustees of the Revocable Living Trust Agreement of Alexander Y. Marn, dated June 18, 1991; Eric Marn and Linda Y. Marn as Co-Trustees of the Revocable Living Trust Agreement of Eric Y. Marn, dated June 18, 1992 (collectively "Plaintiffs") filed the present Complaint against Defendants MA, AWI, AHFI, M Pocket, the Receiver in his individual and official capacities, James Y. Marn, Jr., James K.M. Dunn in his capacity as Trustee of the Annabelle Y. Marn Dunn Trust, Sofos Realty Corp., and Hawaii 5-0 Properties (collectively "Defendants"). The Complaint includes thefollowing six causes of action: (1) a claim for violations of 42 U.S.C. § 1983 against the Receiver; (2) a claim for breach of fiduciary duties against the Receiver and AHFI; (3) a claim for restitution against the Receiver, M Pocket, Sofos Realty, and Hawaii 5-0 Properties; (4) a claim for quiet title against all Defendants; (5) another claim for breach of fiduciary duties against AHFI; and (6) a claim for declaratory relief against all Defendants.
Defendants seek the dismissal of all claims on the grounds that the Court lacks subject matter jurisdiction and because the Complaint fails to state a claim upon which relief can be granted.
Defendants bring their respective motions pursuant to Federal Rules of Civil Procedure 12(b)(1) and (b)(6). Rule 12(b)(1) authorizes a district court to dismiss an action for lack of subject matter jurisdiction. "[T] he party asserting subject matter jurisdiction has the burden of proving its existence." Robinson v. United States, 586 F.3d 683, 685 (9th Cir. 2009). A Rule 12(b)(1) motion "may (1) attack the allegations of a pleading as insufficient to confer subject matter jurisdiction on the court ('facial attack') or (2) 'attack the existence of subject matter jurisdiction in fact' ('factual attack')." Krakauer v. Indymac Mortg. Servs., 2013 WL 704861, at *2 (D. Haw. Feb. 26, 2013) (some citations omitted) (quotingMalama Makua v. Rumsfeld, 136 F. Supp. 2d 1155, 1159 (D. Haw. 2001)). Where the movant makes a factual attack on jurisdiction, the Court may review evidence beyond the complaint. See Savage v. Glendale Union High Sch., 343 F.3d 1036, 1039 n.2 (9th Cir. 2003). In such circumstances, "no presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims." Thornhill Publ'g Co., Inc. v. Gen. Tel. & Elecs. Corp., 594 F.2d 730, 733 (9th Cir. 1979).
Rule 12(b)(6) permits a motion to dismiss a claim for failure to state a claim upon which relief can be granted. Pursuant to Ashcroft v. Iqbal, "[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" 555 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 554, 570 (2007)). "[T]he tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Id. Accordingly, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. (citing Twombly, 550 U.S. at 555). Rather, "[a] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw thereasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly, 550 U.S. at 556).
Although the Complaint includes six counts, only Count I for violation of 42 U.S.C. § 1983 provides a basis for subject matter jurisdiction pursuant to 28 U.S.C. § 1331. Count I alleges that the Receiver's conduct in liquidating assets deprived Plaintiffs of their federal rights to fair hearings and due process. Plaintiffs allege that the Receiver acted beyond the scope of his authority as a court-appointed officer and that he engaged in "intentional judicial acts for ulterior and improper purposes and harassment." Compl. ¶ 118. Because the Court finds that Plaintiffs cannot maintain their claim under § 1983 as discussed below, and the Court declines to exercise supplemental jurisdiction over Plaintiffs remaining non-federal claims, Defendants' motions to dismiss are granted.
The Receiver is a court-appointed judicial officer and is immune from suit for actions taken within the scope of his duties. "Few doctrines were more solidly established at common law than the immunity of judges from liability for damages for acts committed within their judicial jurisdiction[.]" Pierson v. Ray, 386 U.S. 547, 553-54 (1967). Judicial immunity "is an immunity from suit, not just from the ultimate assessment of damage . . . [and] is not overcome by allegations ofbad faith or malice. . . ." Mireless v. Waco, 502 U.S. 9, 11 (1991). Generally, "court-appointed officials acting as arms of the court and performing functions integral to the judicial process are entitled to absolute immunity." Hawaii Ventures, LLC v. Otaka, Inc., 114 Hawai'i 438, 486, 164 P.3d 696, 744 (2007); see also Atkinson-Baker & Assocs. v. Kolts, 7 F.3d 1452, 1454-55 (9th Cir. 1993) (); Stevens v. Cate, 2012 WL 3962490, at *1 (E.D. Cal. Sept. 10, 2012) (...
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