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Alpha Alpha LLC v. Land Strategies LLC

United States District Court, D. New Mexico

June 13, 2019

ALPHA ALPHA, LLC, a New Mexico limited liability company, on behalf of itself and derivatively on behalf of Avalon Jubilee, LLC, Plaintiff,
v.
LAND STRATEGIES, LLC, a Nevada limited liability company, RONALD R. COBB, and PETER GHISHAN, Defendants, and RONALD R. COBB, Third-Party Plaintiff,
v.
AVALON JUBILEE, LLC, a New Mexico limited liability company, Third-Party Defendant.

          MEMORANDUM OPINION AND ORDER

         This matter comes before the Court on Defendants Land Strategies, LLC (Land Strategies), Peter Ghishan (Ghishan), and Ronald Cobb's (Cobb) (collectively, Defendants) Motion to Strike Purported Third Amended Complaint (Doc. 54) in Lieu of Filing Answer to Third Amended Complaint (Motion to Strike), filed March 25, 2019 (Doc. 56), and Plaintiff Alpha Alpha, LLC's (Alpha Alpha), Renewed Motion for Leave to File Third Amended Complaint, and Motion for Extension of Case [Management] Deadline (Motion to Amend), filed May 14, 2019 (Doc. 64). Alpha Alpha filed its response in opposition to Defendants' Motion to Strike on April 9, 2019, and its reply in support of its Motion to Amend on June 11, 2019. (Docs. 60 and 70). Defendants filed their reply in support of the Motion to Strike on April 23, 2019, and their response in opposition to Alpha Alpha's Motion to Amend on May 28, 2019. (Docs. 61 and 66). Having reviewed the briefing, the record, and the applicable law, the Court grants Defendants' Motion to Strike (Doc. 56); strikes Alpha Alpha's Verified Third Amended Complaint for Breach of Fiduciary Duty, Constructive Fraud, Conversion, Willful Breach of Contract, Piercing the Corporate Veil, Aiding and Abetting, and Civil Conspiracy, filed March 11, 2019 (Doc. 54); and denies Alpha Alpha's Motion to Amend (Doc. 64).

         I. Background and Procedural History

         This litigation stems from Alpha Alpha's allegations that Defendants mishandled and misappropriated money from Avalon Jubilee, LLC (Avalon). Alpha Alpha was and is Avalon's majority member. Land Strategies, owned 50/50 by Cobb and Ghishan, was also a member of Avalon. Cobb was Avalon's first Manager, vested with near plenary authority to conduct Avalon's affairs.

         Alpha Alpha, on behalf of Avalon, claims that Cobb acted beyond his authority and abused his position as Avalon's Manager to bilk Avalon out of more than $600, 000.00 by paying Land Strategies an unauthorized $10, 000.00 per month “management fee, ” among other misdeeds. However, the instant motions do not address Alpha Alpha's claims on the merits. Instead, these motions relate to procedural irregularities in Alpha Alpha's attempts to amend its complaint.

         Alpha Alpha filed its Complaint and First Amended Complaint in state court on November 17, 2017. (Doc. 23-2). Alpha Alpha refined its claims into the Second Amended Complaint, filed in state court on June 28, 2018. (Doc. 2). The Second Amended Complaint contained two claims against Cobb, Ghishan, and Land Strategies: Count 1, breach of fiduciary duty, aiding and abetting the breach; and Count II, willful violations of the operating agreement. (Id.) Defendants removed the case on July 9, 2018, asserting diversity jurisdiction. (Doc. 1).

         The Magistrate Judge held a Rule 16 Scheduling Conference and entered a Scheduling Order. (Docs. 19, 20). The Scheduling Order provides that Alpha Alpha could move to amend the pleadings through and including October 24, 2018. (Doc. 20 at 2).

         Alpha Alpha filed its Motion for Leave to File Third Amended Complaint on October 24, 2018. (Doc. 22). In compliance with DNM-LR Civ. 15.1, Alpha Alpha attached its proposed Third Amended Complaint (Proposed AC) as an exhibit to that motion. (Doc. 22-1). It filed a Notice of Filing Regarding Motion to Amend on November 5, 2018, indicating that Defendants did not oppose the motion to amend. (Doc. 24). The Court entered a stipulated Order, submitted by Alpha Alpha, granting Alpha Alpha's “Motion for Leave to file a Third Amended Complaint” on November 13, 2018. (Doc. 26).

         The Proposed AC contains three counts: breach of fiduciary duty, willful violation of the operating agreement, and conversion/civil theft; as well as a section related to piercing the corporate veil, and a section based on aiding and abetting a civil conspiracy. (Doc. 22-1). All told, the Proposed AC spans 117 paragraphs. (Id.)

         On March 11, 2019, Alpha Alpha filed its “Third Amended Complaint” (Filed AC). (Doc. 54). The Filed AC differs in material and substantial ways from the Proposed AC submitted to the Court and approved by defense counsel. Compare (Doc. 54) with (Doc. 22-1). In addition to adding an entirely new claim for fraud, which was not pled in any previous complaint or proposed amended complaint, the Filed AC added forty-seven (47) paragraphs.

         II. Standard of Review

         Rule 12(f)(2) states that the court “may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter. The court may act on motion made by a party either before responding to the pleading or, if a response is not allowed, within 21 days after being served with the pleading.” Whether to grant a motion to strike is a matter of judicial discretion. See Nielson v. Moroni Feed Co., 162 F.3d 604, 606 n.3 (10th Cir. 1998). Motions to strike under Rule 12(f), however, are disfavored. Payne v. Tri-State Careflight, LLC, 327 F.R.D. 433, 445 (D.N.M. 2018). Nonetheless, courts have the inherent authority to manage their dockets and to preserve the integrity of the judicial process. Chambers v. NASCO, 501 U.S. 32, 49 (1991).

         Generally, “[t]he court should freely give leave [to amend a complaint] when justice so requires.” Fed.R.Civ.P. 15(a)(2). The Tenth Circuit has explained,

Rule 15(a) provides that leave to amend “shall be freely given when justice so requires.” Refusing leave to amend is generally only justified upon a showing of undue delay, undue prejudice to the opposing party, bad faith or dilatory motive, failure to cure ...

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