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Jaramillo v. Frewing

United States District Court, D. New Mexico

July 24, 2018

DAVID FREWING, U.S. BOWLING CORPORATION, a Nevada corporation, and CRAIG DILL, Chapter 11 Trustee., Defendants.


         THIS MATTER comes before the Court on Defendant Craig Dill's Amended Motion to Dismiss for Failure to State a Claim, Lack of Jurisdiction, and for Sanctions (Doc. 12) and Defendants David Frewing and U.S. Bowling Corporation's Amended Motion to Dismiss, or in the alternative, Stay the Proceedings (Doc. 14). This matter was referred to me pursuant to 28 U.S.C. § 636(b)(1)(B), (b)(3) by United States District Judge James O. Browning on January 29, 2018. Doc. 18. Consistent with that Order of Reference, the Court enters these proposed findings and recommended disposition (PFRD) recommending that Defendants' Motions be GRANTED for the reasons explained below.

         I. BACKGROUND

         Plaintiffs Rick Jaramillo and Steve Duran are equity partners in Railyard Company, LLC. On September 4, 2015, Railyard Company commenced Chapter 11 bankruptcy proceedings. See In re Railyard Co., LLC, No. 15-12386-t11, Doc. 1. On July 13, 2016, United States Bankruptcy Judge Robert Jacobvitz entered an order approving the appointment of Defendant Craig Dill as Chapter 11 Trustee of the bankruptcy estate over the objections of Plaintiffs Duran and Jaramillo. Bank. Proc., Doc. 308. On August 18, 2018, Defendant Dill, in his capacity as Trustee, moved for an order approving the rejection of an executory contract between Railyard Company, LLC and Plaintiff Railyard Brewing Company. United States Bankruptcy Judge David T. Thuma granted the motion and approved rejection of the lease. Bank. Proc., Doc. 508. Judge Thuma further approved rejection of a pre-petition lease with Plaintiff Ringside Entertainment and terminated that lease as well. Bank. Proc., Doc. 420.

         Both leases concerned a space at a two-story, multi-tenant building at the Railyard in Santa Fe, New Mexico. See Bank. Proc., Doc. 629. Plaintiff Ringside Entertainment's lease contemplated use of the space as a combination restaurant, bar, and eight-lane bowling center. Id. Pursuant to the plan, Plaintiff Ringside contracted with U.S. Bowling for the purchase of bowling lanes and related bowling equipment. Id. At some point, however, Ringside Entertainment abandoned this project. Id. On January 30, 2014, Plaintiff Railyard Brewing signed a lease for the space with the intention of operating the restaurant, bar, and bowling center. Id. After bankruptcy proceedings were commenced, Defendant Dill determined that a bowling center would not be feasible at that location and moved for an order approving the sale of the bowling equipment. Plaintiffs Duran and Jaramillo objected to the sale of the equipment and contended that the bowling equipment did not belong to the bankruptcy estate. Id. at 7. Plaintiffs Duran and Jaramillo further argued in the alternative that the sale should not be completed because the bankruptcy estate has claims against U.S. Bowling for negligent installation of the bowling equipment. Id. at 8. Judge Thuma rejected these arguments and approved sale of the bowling equipment on June 21, 2017. Bank. Proc., Doc. 629 at 11; Bank. Proc., Doc. 640. U.S. Bowling ultimately entered into an agreement to purchase back the bowling equipment. Bank Proc., Doc. 640.

         On June 23, 2017, Plaintiffs filed the present lawsuit against Chapter 11 Trustee Craig Dill, U.S. Bowling, and David Frewing bringing claims for breach of contract, promissory estoppel, and negligent misrepresentation. Civ. No. 17-673, Doc. 1. Plaintiffs' claims are premised on the circumstances surrounding U.S. Bowling's installation of the bowling equipment and the eventual sale of the bowling equipment by Defendant Dill. While difficult to parse the exact facts being asserted in support of Plaintiffs' claims, Plaintiffs allege that they entered into an agreement for the installation of bowling equipment with U.S. Bowling. Doc. 1 at ¶ 12. Plaintiffs allege that in March 2013, Jaramillo signed a change order for the installation of sound attenuation equipment due to complaints from other tenants regarding noise emanating from the bowling equipment. Doc. 1 at ¶ 15. Plaintiffs allege that U.S. Bowling represented that installation of the sound attenuation equipment would satisfy the other tenants' concerns. Doc. 1 at ¶ 15. Plaintiffs allege, however, that they continued to receive complaints regarding noise. Doc. ¶ 16. Plaintiffs allege that they continued to exchange communications with U.S. Bowling regarding completion of the sound attenuation equipment as well as other bowling equipment. Doc. ¶ 17. Plaintiffs allege that the project was not completed because Defendant Dill subsequently moved in the bankruptcy proceedings to terminate the project. Doc. 1 at ¶ 21. Plaintiffs allege Defendant Dill subsequently entered into an agreement with U.S. Bowling for U.S. Bowling to purchase the bowling equipment at a significantly reduced price. Doc. 1 at ¶ 22. Plaintiffs further allege that U.S. Bowling did not have the appropriate contractor's licenses to undertake the work contrary to state law. Doc. 1 at ¶ 24. Plaintiffs allege that Defendant Dill is “aiding and abetting” U.S. Bowling's unlicensed contracting work and conspired with U.S. Bowling “in its unjust enrichment.” Doc. 1 at ¶ 26.

         This is not the first lawsuit Plaintiffs Steven Duran and Rick Jaramillo have pursued against Defendant Dill in his capacity as trustee of the bankruptcy estate. On August 15, 2016, Plaintiffs filed suit against Mr. Dill and attempted to nullify Judge Jacobvitz's order approving his appointment as trustee. See Duran v. Dill, Civ. No. 16-928. Chief Judge William P. Johnson ultimately dismissed the plaintiffs' Complaint on the bases that (1) Defendant Dill, in his capacity as trustee, was immune from suit; (2) the court lacked subject matter jurisdiction because the plaintiffs had not obtained permission to sue Defendant Dill, and (3) the plaintiffs insufficiently served him. See Id. Doc. 6 at 5-7.

         In the present case, Defendants filed their Amended Motions to Dismiss on November 1, 2017, and November 6, 2017, respectively. Defendants raise multiple reasons as to why Plaintiffs' Complaint should be dismissed. Both Defendants contend that (1) the Court does not have federal question or diversity jurisdiction; (2) Plaintiffs do not have standing to pursue claims set forth in the Complaint, which are exclusively bankruptcy estate property; (3) Plaintiffs have willfully violated the automatic stay in the bankruptcy proceeding; and (4) Plaintiffs have failed to comply with D.N.M.LR-Civ. 83.7 requiring corporations, partnerships, or business entities to be represented by attorneys authorized to practice law before this Court. Defendant Dill separately also moves for dismissal on the basis that he is entitled to quasi-judicial immunity in his capacity as trustee of the bankruptcy estate and that the Court lacks subject matter jurisdiction because Plaintiffs failed to obtain the permission of the Bankruptcy Court to sue him in that capacity. Defendant Frewing separately contends that Plaintiffs have failed to state a claim against him.

         Plaintiffs did not respond to Defendants' Amended Motions to Dismiss. Although the Court's local rules provide that a party's failure to respond to a motion generally constitutes consent to grant the motion, the Court “cannot…grant a motion to dismiss or a motion for summary judgment based solely on plaintiff's failure to respond and must consider the merits of the motion.” See Issa v. Comp USA, 354 F.3d 1174, 1177-78 (10th Cir. 2003). As explained below, because neither federal question nor diversity jurisdiction exists, I recommend concluding that the Court lacks subject matter jurisdiction and that Plaintiffs' Complaint should be dismissed.

         II. ANALYSIS

         A. Plaintiffs Duran and Jaramillo are Not Permitted to Represent Railyard Brewing Company, LLC and Ringside Entertainment, LLC Pro Se

         As an initial matter, the Court notes that Plaintiffs Duran and Jaramillo are proceeding pro se. There has been no entry of appearance on behalf of Railyard Brewing Company, LLC or Ringside Entertainment, LLC. The Supreme Court of the United States has directed lower courts to hold pro se litigants' pleadings “to less stringent standards than formal pleadings drafted by lawyers.” Haines v. Kerner, 404 U.S. 519, 520, 92 S.Ct. 594, 30 L.Ed.2d 652 (1972). The pro se litigant “nevertheless must follow the same rules of procedure that govern other litigants, ” Green v. Dorrell, 969 F.2d 915, 917 (10th Cir.1992), and it is not “the proper function of the district court to assume the role of advocate for the pro se litigant, ” Hall v. Bellmon, 935 F.2d 1106, 1110 (10th Cir.1991).

         Under this district's local rules, “a corporation, partnership or business entity other than a natural person must be represented by an attorney authorized to practice before this Court.” D.N.M.LR-Civ. 83.7. Although it is certainly permissible for Plaintiffs Duran and Jaramillo to represent themselves pro se in this litigation, under D.N.M.LR-Civ. 83.7, they cannot represent Plaintiffs Railyard Brewing Company or Ringside Entertainment. Both of these Plaintiffs are limited liability companies and are therefore obviously not natural persons. To the extent that Plaintiffs Jaramillo and Duran continue to pursue claims in this lawsuit as pro se litigants, such representation shall be limited to their individual interests.

         B. Federal Jurisdiction

         “Federal courts are courts of limited jurisdiction; they must have a statutory basis for their jurisdiction. There are two statutory bases for federal subject-matter jurisdiction: diversity jurisdiction under 28 U.S.C. § 1332 and federal-question jurisdiction under 28 U.S.C. § 1331.” Nicodemus v. Union Pac. Corp., 318 F.3d 1231, 1235 (10th Cir.2003)(internal quotations and citations omitted). “If jurisdiction is challenged, the burden is on the party claiming jurisdiction to show it by a preponderance of the evidence.” Karnes v. Boeing Co., 335 F.3d 1189, 1193 (10th Cir.2003)(citing United States ex rel. Hafter v. Spectrum Emergency Care, Inc., 190 F.3d 1156, 1160 (10th Cir.1999)).

         Because Plaintiffs did not respond to Defendants' Amended Motions to Dismiss, the only jurisdictional facts proffered by Plaintiffs appear in their Complaint. Plaintiffs Duran and Jaramillo allege that they reside and are domiciled in Santa Fe, New Mexico. Doc. 1at ¶¶ 1-2. Plaintiffs allege that Plaintiffs Railyard Brewing Co, and Ringside Entertainment are limited liability companies organized under the laws of the State of New Mexico with their place of business being in Santa Fe, New Mexico. ¶¶ 3-4. Plaintiffs allege that Defendant U.S. Bowling is a corporation organized in the State of Nevada with its principle place of business in Chino, California. Doc. 1 at ¶ 5. Plaintiffs allege that Defendant David Frewing resides in Chino, California. Doc. 1 at ¶ 6. Finally, Plaintiffs allege that Defendant Dill resides in Albuquerque, New Mexico. Doc. 1 ¶ 7. Plaintiffs do not clarify whether they are asserting that the Court has federal question jurisdiction or diversity jurisdiction but instead merely state that based on the above facts the Court has “jurisdiction over the parties and the subject matter of this action.” Doc. 1 at ¶ 10. I will accordingly consider both potential bases of jurisdiction.

         C. Law Regarding Federal ...

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