Opinion
6:21-cv-01199-MK
03-15-2022
BRUNO HANNEY; and PAUL TAYLOR, individually and on behalf of all others similarly situated, Plaintiffs, v. EPIC AIRCRAFT LLC, a Delaware limited limited liability company, Defendant.
FINDINGS AND RECOMMENDATION
MUSTAFA T. KASUBHAI, United States Magistrate Judge.
Plaintiffs filed this putative class action against Defendant Epic Aircraft, LLC, alleging breach of contract, breach of the implied covenant of good faith and fair dealing, and for violating the Oregon Unlawful Trade Practices Act, Or. Rev. Stat. (“ORS”) §§ 646.605, et seq. Compl., ECF No. 1. Epic moves to dismiss under Federal Rule of Civil Procedure 12(b)(7) for failure to join a necessary party and moves to strike three paragraphs of the Complaint, which Plaintiffs oppose. See ECF Nos. 14, 24. For the reasons that follow, Epic's motion to strike is DENIED; Epic's motion to dismiss should be DENIED without prejudice.
BACKGROUND
Epic manufactures airplanes. In 2014, Epic announced its plan to design, develop, and manufacture a single-engine, six-seat turboprop E1000 aircraft, with hopes of receiving Federal Aviation Administration (“FAA”) certification in 2015. Compl. ¶ 2. Epic took reservations for the E1000 aircraft at a price of $2.75 million. Id. ¶ 6. Epic's customers, including Plaintiffs, entered into aircraft customer reservation agreements and submitted the required monetary deposits. Id. ¶¶ 3-4, 17-18. After several years of reassuring customers that their E1000 aircraft orders would be fulfilled, Epic received FAA type and production certification in November 2019 and July 2020. Id. ¶¶ 7-8.
After FAA certification for the E1000, Epic informed its customers with reservation agreements that the aircraft would not be available for sale. Id. ¶¶ 10, 70. Instead, Epic offered to sell a “new” E1000 GX aircraft model to its existing E1000 customers for a retail price of $3.85 million. Id. ¶ 11. Epic refused to honor its customer reservation agreements to manufacture and sell E1000 aircrafts to Plaintiffs and other aircraft reservation holders. Id. ¶ 13.
In August 2021, Plaintiffs filed this lawsuit on behalf of themselves and other reservation agreement holders, alleging that Epic breached the terms of E1 000 aircraft customer reservation agreements and made material misrepresentations and omissions in connection with the marketing and sale of E1000 aircraft. Id. ¶¶ 131-83.
STANDARDS OF REVIEW
I. Motion to Dismiss
Rule 12(b)(7) provides that a party may move to dismiss a complaint for “failure to join a party under Rule 19.” Rule 19 prescribes a two-step analysis to determine whether a party should or must be joined. Takeda v. Northwestern Nat'l Life Ins. Co., 765 F.2d 815, 819 (9th Cir. 1985).
Under Rule 19(a)(1), the court must first determine whether the party is necessary. Id. A party is necessary where:
(A) in that person's absence, the court cannot accord complete relief among existing parties; or (B) that person claims an interest relating to the subject of the action and is so situated that disposing of the action in the person's absence may (i) as a practical matter impair or impede the person's ability to protect the interest; or (ii) leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest.Fed. R. Civ. P. 19(a)(1)(A)-(B).
If the party is necessary, but their joinder would destroy jurisdiction, the court must then consider, under Rule 19(b), whether “in equity and good conscience” the action should proceed without their joinder. Takeda, 765 F.2d at 819; see also E.E.O.C. v. Peabody W. Coal Co., 400 F.3d 774, 779 (9th Cir. 2005) (noting that whether a party is indispensable to an action involves “three successive inquiries” with the first determining whether the absent party is “required, ” the second determining the feasibility of joinder, and the third, if the absent party is required and cannot feasibly be joined, whether “in equity and good conscience, the action should proceed among the existing parties or should be dismissed.”). Four factors are relevant to the indispensable inquiry:
(1) the extent to which a judgment rendered in the person's absence might prejudice that person or the existing parties; (2) the extent to which any prejudice could be lessened or avoided by: (A) protective provisions in the judgment; (B) shaping the relief; or (C) other measures; (3) whether a judgment rendered in the person's absence would be adequate; and (4) whether the plaintiff would have an adequate remedy if the action is dismissed for nonjoinder.Fed. R Civ. P. 19(b).
This analysis is “a practical, fact-specific one, designed to avoid the harsh results of rigid application.” Dawavendewa v. Salt River Project Agric. Improvement & Power Dist, 276 F.3d 1150, 1154 (9th Cir. 2002). Generally, determinations under Rule 19 are left to the sound discretion of the trial court. Kescoli v. Babbitt, 101 F.3d 1304, 1309 (9th Cir. 1996).
II. Motion to Strike
A court may strike from a pleading “any redundant, immaterial, impertinent, or scandalous matter.” Fed.R.Civ.P. 12(f). The purpose of Rule 12(f) is to help “avoid the expenditure of time and money that must arise from litigating spurious issues by dispensing with those issues prior to trial.” Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970, 973 (9th Cir. 2010) (quoting Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir. 1993), rev'd on other grounds, 510 U.S. 517 (1994)). However, motions to strike are generally disfavored and infrequently granted. Legal Aid Servs. of Or. v. Legal Servs. Corp., 561 F.Supp.2d 1187, 1189 (D. Or. 2008); see also Capella Photonics, Inc. v. Cisco Sys., Inc., 77 F.Supp.3d 850, 858 (N.D. Cal. 2014) (“Motions to strike are regarded with disfavor because of the limited importance of pleadings in federal practice and because they are often used solely to delay proceedings.” (quotation marks and alterations omitted)).
Courts may not resolve disputed and substantial factual or legal issues in deciding a motion to strike. Whittlestone, 618 F.3d at 973. “A motion to strike should not be granted unless it is clear that the matter to be stricken could have no possible bearing on the subject matter of the litigation.” Contreras, ex rel. Contreras v. Cty. of Glenn, 725 F.Supp.2d 1157, 1159 (E.D. Cal. 2010) (quoting Bassett v. Ruggles, 2009 WL 2982895, at *24 (E.D. Cal. Sept. 14, 2009)).
DISCUSSION
I. Motion to Dismiss
Epic argues that Plaintiffs failed to join a necessary party under Rule 19 and therefore dismissal is appropriate. Specifically, Epic contends that non-party James Bosco, who was allegedly a party to the reservation deposit agreement between Epic and Plaintiff Haney, is a necessary party to this action because “his absence may cause [Epic] to face multiple lawsuits on the same cause of action.” Def.'s Mot. Dismiss and Mot. Strike 3, ECF No. 14 (“Def.'s Mot.”). Plaintiffs respond that, given Rule 19's explicit provision relating to class actions, the Court should defer ruling on the joinder issue until after the class certification stage of this lawsuit. Pl.'s Opp'n Def.'s Mot. Dismiss 4-6, ECF No. 24 (“Pls.' Opp'n”); FRCP 19 (d) (“This rule is subject to Rule 23.”).
Plaintiffs' argument is well taken. The standard for joining a party under Rule 19(a) must be read in harmony with Rule 19(d)'s exception for class actions. Shimkus v. Gersten Companies, 816 F.2d 1318, 1321 (9th Cir. 1987) (“We hold that Rule 19(d) simply requires us to respect the language of Rule 23, but allows joinder to the extent its use does not conflict with Rule 23's provisions.”). In situations where a defendant moves to dismiss a putative class action before class certification, courts have deferred ruling on the motion until after determining whether class certification is appropriate. Eberhard v. Old Republic Nat'l Title Ins. Co., 2013 WL 12293491, at *3 (N.D. Ohio Sept. 13, 2013) (holding that resolution of Rule 12 motion was premature where the plaintiff's had “pled their claims as a class action” but the court had “not determined class certification under Rule 23”); cf. Bartle on Behalf of Herself v. TD Ameritrade Holdings Corp., 2020 WL 9211182, at *2 (W.D. Mo. Aug. 7, 2020) (denying ruling on motion to join necessary party without prejudice until after ruling on class certification).
The Court finds the reasoning of Eberhard and Bartle persuasive and will recommend deferring ruling on Plaintiff's Rule 12 motion until after determining whether to certify the class in this case. Plaintiffs have brought this putative class action “on behalf of all persons or entities . . . who entered into E1000 aircraft reservation agreements with Epic.” Compl. ¶ 1. Should the Court ultimately determine that class certification is appropriate, Bosco and other similarly situated individuals would be bound by the outcome of this litigation thereby negating the specter of an additional lawsuit. In the event this case is not certified as a class action, Epic may renew its motion. Under the circumstances presented here, the Court should find that ruling on Epic's Rule 12 motion is premature.
II. Motion to Strike
Epic argues that the Court should strike paragraphs 29 through 31 of the Complaint because they “are immaterial and impertinent to this action.” Def.'s Mot. 5. Those paragraphs allege that:
29. In 2009, several lawsuits were filed against Epic that alleged serious misconduct by the company's senior-level principals. In a sworn statement, Epic's former Chief Financial Officer David Clark stated that Epic owed its customer builders an estimated $14 million for parts and that the company did not have sufficient funds to pay those debts. Clark's sworn statement also alleged many financial irregularities and that the company's financial reports and practices did not comply with generally accepted accounting practices.
30. In September 2009, Epic's former Chief Executive Officer Rick Schrameck was removed by the board of directors from any managerial or supervisory capacity, and the company filed for Chapter 11 bankruptcy seeking to reorganize and find new investors. The company was subsequently sold at auction.
31. In 2015, Schrameck was criminally charged by federal authorities with eight counts of wire fraud, four counts of mail fraud and six counts of money laundering. Criminal charges against Schrameck alleged that he sold Epic aircraft kits to customers for millions of dollars but used the money for other projects as well as to support his lavish lifestyle. In 2018, Schrameck pled guilty to one count of wire fraud and was sentenced to prison.Compl. 7-8.
Epic argues that the events described above are outside the temporal scope of this action and have “no bearing on the Reservation Deposit Agreements or [Epic's] decision to terminate those agreements.” Def.'s Mot. 5. Plaintiffs assert that the allegations in paragraphs 29 through 31 are “substantially similar to what happened in this case and involves nearly identical aircraft products” and therefore should not be struck. Pl.'s Opp'n 12.
The Court declines to strike the paragraphs from the Complaint. Courts should not strike allegations supplying background or historical material unless it is unduly prejudicial to the opponent. Adidas Am., Inc. v. ECCO USA, Inc., No. 3:16-cv-684-SI, 2017 WL 517794, at *3 (D. Or. Feb. 8, 2017). Epic has failed to show it will suffer the required undue prejudice to warrant striking these allegations from the Complaint.
Further, the allegations in paragraphs 29 through 31 are likely relevant to Plaintiffs' claims for breach of the implied covenant of good faith and fair dealing as well as violation of the Oregon Unlawful Trade Practices Act. If proven, the allegations show Epic's knowledge and history of entering into contractual agreements based on public promises to aircraft customers that Epic never intended to honor. As these allegations relate to Plaintiffs' claims and the subject matter of this litigation, they are neither immaterial nor impertinent. See Ormond v. Anthem, Inc., 2009 WL 102539, at *4 (S.D. Ind. Jan. 12, 2009) (finding that 15 paragraphs alleging deceptive conduct were relevant to claims for breach of fiduciary duties of good faith and fair dealing).
As such, the Court declines to strike the paragraphs. Epic's motion to strike is DENIED.
RECOMMENDATION
For the reasons above, Epic's motion to dismiss (ECF No. 14) should be DENIED without prejudice. Epic's request for oral argument is DENIED as unnecessary. See LR 7-1(d)(1).
This recommendation is not an order that is immediately appealable to the Ninth Circuit Court of Appeals. Any notice of appeal pursuant to Federal Rule of Appellate Procedure 4(a)(1) should not be filed until entry of the district court's judgment or appealable order. The Findings and Recommendation will be referred to a district judge. Objections to this Findings and Recommendation, if any, are due fourteen (14) days from today's date. See Fed.R.Civ.P. 72. Failure to file objections within the specified time may waive the right to appeal the District Court's order. Martinez v. Ylst, 951 F.2d 1153, 1157 (9th Cir. 1991).