Docs. 540, 550, 742, 745, 756, 784, 759, and 799
This dispute arises out of a housing development known as Fox Hollow of Turlock ("Property"). Plaintiff Fox Hollow of Turlock Homeowners' Association ("Fox Hollow HOA") is the homeowner's association. Plaintiff California Equity Management Group, Inc. ("CEMG") is the record owner of lots contained within the Property. Fox Hollow HOA, CEMG, and Andrew Katakis (collectively "Plaintiffs") are represented by the same counsel, and form one side of the litigation. Defendants Lairtrust, LLC ("Lairtrust"), Capstone, LLC ("Capstone"), Mauctrst, LLC ("Mauctrst") (collectively "LLC Defendants") are limited liability companies that were allegedly used to convert homeowners' association funds, effect property transfers, and commit other acts. Defendants Richard Sinclair, Brandon Sinclair, and Gregory Mauchley (collectively "Individual Defendants") were principals, directors, or employees of the LLC Defendants.
In 1988, Richard Sinclair and his wife purchased the Property and obtained approval from the City of Turlock to construct a 35 unit town house complex. They obtained a loan secured by a deed of trust on the Property. They built an apartment complex on the Property. In 1992, Richard Sinclair and his wife defaulted on the loan. They obtained approval to subdivide the Property into 19 lots. On June 8, 1994, Richard Sinclair filed for bankruptcy. In 1995, Stanley Flake as Trustee of the Julie Insurance Trust purchased the Property. In 1997 or 1998, Gregory Mauchley and Mauctrst acquired the Property. Gregory Mauchley and Mauctrst obtained loans secured by the individual lots on the Property from various third parties. They fell into default on those loans. Fox Hollow HOA was established in December 2000. Plaintiffs allege the Individual and LLC Defendants collected homeowners' association dues on lots already sold to help pay the cost of foreclosure litigation. Through various legal processes and foreclosure, CEMG became the owner of 8 lots on the Property. Defendants challenge CEMG's ownership based on allegations of wrongful foreclosure and interference with contract.
This case is a consolidation of three related cases: an action commenced by Fox Hollow HOA against the Individual Defendants, LLC Defendants, and Stanley Flake as Trustee of Capstone Trust, Case No. CV-F-03-5439 ("Fox Hollow Action"); an action commenced by CEMG against the Individual Defendants, LLC Defendants, Diana Mauchley, Deborah Sinclair, Sinclair Enterprises, Inc., Stanley Flake, and Stanley Flake as Trustee of the F. Hanse Trust and of the Julie Insurance Trust Case No. CVF- 03-5774 ("CEMG Action"); and an action commenced by the LLC Defendants against Plaintiffs in the Stanislaus County Superior Court, Case No. 322675 ("Lairtrust Action"), removed to this Court and consolidated with the Fox Hollow and CEMG Actions by Order filed on October 6, 2003 ("Consolidated Federal Action"). The Consolidated Federal Action is also related to another state court case (Stanislaus County Superior Court, Case No. 332233, originally filed on April 24, 2003) in which the Individual Defendants and LLC Defendants filed suit against Plaintiffs ("State Court Action"). Plaintiffs also filed a cross-complaint against Richard Sinclair, Gregory Mauchley, and Mauctrst. The State Court Action dealt with the substance of the dispute between the parties (the foreclosure process, ownership of the individual lots on the Property). A 36 day bench trial was held, starting on December 9, 2008. On August 18, 2009, judgment was entered against the Individual Defendants and LLC Defendants on the main complaint and judgment was entered against Plaintiffs on the cross-complaint. Doc. 433, Part 8.
The State Court Action is on appeal.
The operative complaint in this Consolidated Federal Action was filed on July 21, 2010. Doc. 410. The Individual Defendants filed a document termed a cross-complaint ("Cross-Complaint) against Plaintiffs. Doc. 425. Lairtrust filed a counterclaim ("Counterclaim") against Plaintiffs. Doc. 471. Plaintiffs generally allege that the Cross-Complaint and Counterclaim are duplicative of the State Court Action. Richard Sinclair is a practicing attorney and has sought to represent both himself and other defendants in this case. The Consolidated Federal Action has proceeded in parallel to the State Court Action, but as stated above, the heart of dispute is contained in the State Court Action. The Consolidated Federal Action appears to be limited to ancillary disputes such as homeowners' association funds and the tactics each party used in prosecuting their cases. The parties filed a notice of settlement on July 16, 2007 ("2007 Settlement"). Doc. 303. Though the 2007 Settlement was meant to resolve all issues, that turned out not to be the case. Judge Wanger retired at the end of September 2011. The case was reassigned to the undersigned. Doc. 804. There were multiple motions that had been filed but not resolved at the time of transfer.
A. Motion to Strike Cross-Complaint (Doc. 742)
On August 10, 2010, the Individual Defendants filed the Cross-Complaint. Doc. 425. Plaintiffs made a motion dismiss, or in the alternative, to stay and sever. Doc. 431. Judge Wanger ordered the Cross-Complaint stayed "except for claims arising out of (i) Cross-Defendants' [Plaintiffs'] alleged breach of the 2007 settlement agreement, and (ii) Cross-Defendants' alleged conduct during and after trial of the state court action." Doc. 476, 2:8-11. Judge Wanger found the Cross-Complaint largely duplicative of the ongoing State Court Action. Plaintiffs filed a second motion to sever and stay the Cross-Complaint claims related to the alleged breach of the 2007 Settlement. Doc. 477. On May 13, 2011, Judge Wanger granted the motion. Doc. 572. Plaintiffs' also made a motion for partial summary judgment for those Cross- Complaint claims related to Plaintiffs' conduct during and after trial in the State Court Action. Doc. 478. On June 24, 2011, Judge Wanger granted the motion, finding that the Individual Defendants did not have standing to sue on those claims. Doc. 640. On June 30, 3011, Lairtrust made a motion for leave to file or otherwise join in the Cross-Complaint to correct any deficiencies in standing. Doc. 659. The motion was set for August 8, 2011. On August 4, 2011, Richard Sinclair then filed a "First Amended Cross-Complaint" on behalf of himself and Lairtrust. Doc. 723. At the August 8, 2011 hearing, Judge Wanger orally denied the motion with further review at a scheduled hearing on September 26, 2011. Doc. 725. Before that later hearing date, Judge Wanger issued an order which stated "The Motion for Leave to File a Cross-Complaint is denied without prejudice to filing of a proper motion. There is no such pleading under the Federal Rules of Civil Procedure as a Cross-Complaint." Doc. 763: 3:13-15.
Plaintiffs seek to have the First Amended Cross-Complaint stricken. Doc. 742. Leave to amend was denied. Doc. 742 should be properly stricken as it was improperly filed. Plaintiffs' motion to strike is granted. All remaining claims in the Cross-Complaint are stayed.
B. Motions to Strike Counterclaim (Docs. 742 and 799)
On January 19, 2011, Lairtrust filed the Counterclaim. Doc. 471. Plaintiffs made a motion to sever and stay all claims contained in the Counterclaim except those related to Plaintiffs' conduct during and after trial in the State Court Action. Doc. 480. On May 11, 2011, Judge Wanger granted the motion in full. Doc. 576. It should be noted that claims related to the 2007 Settlement were not excluded from the stay. Doc. 563:6:1-3. Plaintiffs also made a motion for a more definite statement regarding those claims related to Plaintiffs' conduct during and after trial in the State Court Action. Doc. 485. On July 7, 2011, Judge Wanger granted the motion and gave Lairtrust 30 days to file an amended Counterclaim. Doc. 667. Lairtrust did not file an amended pleading before the deadline passed. On August 22, 2011, Plaintiffs filed a motion to strike the Counterclaim. Doc. 742. Lairtrust then filed the First Amended Counterclaim on September 12, 2011. Doc. 773. Plaintiffs moved to strike the First Amended Counterclaim. Doc. 799. Lairtrust missed the deadline for filing a First Amended Counterclaim. Further, the document filed does not address the issues Judge Wanger discussed in granting the motion for more definite statement. In his memorandum, Judge Wanger indicated:
Lairtrust's allegations concerning the unstayed claims are unclear, but it appears Lairtrust's unstayed counterclaims are based on the following alleged conduct carried out by Plaintiffs: (1) Katakis assessed extra assessments on Lot 1 and then wrongfully foreclosed on Lot 1 during the operative time period; (2) the Fox Hollow HOA's accounting for Lot 1 contained 'numerous discrepancies' during the operative time period; and (3) Katakis excluded Lairtrust from voting and participating in the HOA.... Lairtrust's counterclaim asserts twelve causes of action. It is unclear from the face of the counterclaim which of the twelve causes of action are based on conduct that is outside the scope of the issues that have already been stayed. For example, inter alia, Lairtrust's fraud cause of action does not reference specific conduct but rather makes general allegations that may or may not concern conduct and issues that are subject to the order staying portions of Lairtrust's counterclaim. Because the complaint ...