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Cardinalli v. Superior Court of California for County of Monterey

United States District Court, Ninth Circuit

November 7, 2013

SUPERIOR COURT OF CALIFORNIA FOR THE COUNTY OF MONTEREY, a California State court, et al. Defendants.


LUCY H. KOH, District Judge.

Sal Cardinalli ("Plaintiff") brings this action against his two brothers, John Cardinalli, Jr. and Stephen Cardinalli; his father, John Cardinalli, Sr.[1]; his nephews Vincent Cardinalli and John T. Cardinalli III; the John T. Cardinalli, Jr. and Angela Cardinalli Living Trust and the Stephen P. Cardinalli and Francesca Cardinalli Living Trust; the Salinas Yellow Cab Co., LLC; and Yellow Cab, Monterey Airporter, Inc. (collectively, "Defendants") for declaratory relief, intentional interference with economic expectancy, conspiracy to defraud, and fraudulent conveyance. ECF No. 1 ("Compl.") at ¶¶ 7-8, 10, 40-58.[2] In addition, Plaintiff brings claims against John Cardinalli, Jr.; Stephen Cardinalli; and John Cardinalli, Sr. for partition of real property and unpaid reasonable rental value of property. Compl. at ¶¶ 59-72. Before the Court is Defendants' Motion to Dismiss under Rule 12(b)(1) and 12(b)(6). See ECF Nos. 22 ("Mot."), 26 ("Opp'n"), 29 ("Reply"). For the reasons stated herein, the Court GRANTS Defendants' Motion to Dismiss Plaintiff's complaint with leave to amend.


This case arises out of a dispute about a family business. In 1976, Plaintiff Sal Cardinalli and Defendants John Cardinalli, Jr.; Stephen Cardinalli; and John Cardinalli, Sr. purchased Monterey Checker Transportation, Inc. ("MCT"), a Monterey-based taxicab company. Compl. at ¶ 17; Mot. at 3. Each party owned a twenty-five percent share of MCT. Compl. at ¶ 17; Mot. at 3. Plaintiff alleges that, beginning in September 2002, Defendants froze Plaintiff out of "any meaningful participation in the management, operation, control, or rental" of MCT and its related real estate. Compl. at ¶ 61. Plaintiff claims, for example, that Defendants have allowed taxicabs to dump toxic waste on the real estate owned by MCT and have refused to pay Plaintiff rental payments owed to Plaintiff as part of his share in MCT despite Plaintiff's "demand[s] that he be afforded the rights and privileges of an owner." Compl. at ¶¶ 61-62, 64, 68.

In October 2004, Plaintiff brought a state court action against MCT, Defendants John Cardinalli and Stephen Cardinalli, their wives, and New Hope, Inc. for declaratory relief, accounting, partition, breach of fiduciary duty, and an allegation for the involuntary dissolution of the corporation. Cardinalli v. Cardinalli, H032309, 2010 WL 5176852 at *1-2, 4 (Cal.Ct.App. Dec. 21, 2010) (unpublished). On March 26, 2007, the state court found for Plaintiff as to his involuntary dissolution claim but denied his remaining claims. Id. at *1. In particular, the court ordered that Plaintiff's twenty-five percent share in MCT be liquidated and that Plaintiff be reimbursed for $283, 750. Compl. at ¶¶ 18-19. The California Court of Appeal affirmed this decision on December 21, 2010. Cardinalli, 2010 WL 5176852 at *15. The judgment became final in March 2011. Compl. at ¶ 20; Mot. at 4.

Two months after the state court's judgment became final, MCT filed for Chapter 11 bankruptcy. Compl. at ¶ 23(d). MCT's filing for Chapter 11 bankruptcy triggered an automatic stay as to all litigation concerning MCT's debts, so Plaintiff could not sue MCT to collect his state court judgment. Compl. at ¶ 23( l ); see In re Palmdale Hills Prop., LLC, 423 B.R. 655, 663 (B.A.P. 9th Cir. 2009) aff'd, 654 F.3d 868 (9th Cir. 2011) ("The filing of a bankruptcy petition creates a bankruptcy estate, which is protected by an automatic stay of actions by all entities to collect or recover on claims."). Plaintiff therefore moved to dismiss the bankruptcy petition "on the ground of fraud" and for "substantive consolidation." Compl. at ¶ 31. The bankruptcy court denied both of Plaintiff's motions. Compl. at ¶ 31. Subsequently, Plaintiff and MCT stipulated to convert the Chapter 11 reorganization to a Chapter 7 liquidation. In re Monterey Checker Transportation, Inc., No. 11-54837, ECF No. 49 (Bankr. N.D. Cal. Sept. 21, 2011). The bankruptcy court granted the stipulation. In re Monterey Checker Transportation, Inc., No. 11-54837, ECF No. 50 (Bankr. N.D. Cal. Oct. 13, 2011). Plaintiff then entered into a stipulation with the trustee overseeing MCT's Chapter 7 liquidation to lift the automatic stay as to the Defendants so that Plaintiff could file an action against Defendants in state court. In re Monterey Checker Transportation, Inc., No. 11-54837, ECF No. 76 (Bankr. N.D. Cal. May 25, 2012); Compl. at ¶ 32. The bankruptcy court granted this stipulation to lift the automatic stay. In re Monterey Checker Transportation, Inc., No. 11-54837, ECF No. 81 (Bankr. N.D. Cal. May 30, 2012). The bankruptcy court found that Plaintiff's state law claims against Defendants "[did] not in any way effect [sic] the bankruptcy proceedings." Id. at 3.

Plaintiff filed an action in the Superior Court of Monterey County in April 2012. Compl. at ¶ 33. Plaintiff alleged eleven claims including conspiracy to defraud, intentional interference with economic expectancy, and partition of real property. Mot. at 4-5. The state court dismissed all eleven of Plaintiff's claims and denied Plaintiff leave to amend for all of his claims except for conspiracy to defraud.[3] Compl. at ¶ 35. Plaintiff then filed a motion for reconsideration, which the court denied. Compl. at ¶¶ 36-37. Finally, the court dismissed Plaintiff's first amended complaint without leave to amend as to all eleven of Plaintiff's causes of action. Compl. at ¶ 37. Plaintiff appealed the trial court's judgment to the California Court of Appeal, where the action is now pending. Mot. at 5.

After receiving decisions from the bankruptcy court and state trial court, Plaintiff filed the instant case in this Court on December 14, 2012, alleging state law claims to "hedge his bets" against an adverse ruling by the Court of Appeal. Opp'n at 6. Defendants move to dismiss Plaintiff's complaint due to lack of subject matter jurisdiction and for failure to state a claim. Mot. at 7-11. Plaintiff filed an opposition, ECF No. 26, and Defendants filed a reply, ECF No. 29.


A. Rule 12(b)(1)

A defendant may move to dismiss an action for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1). A motion to dismiss for lack of subject matter jurisdiction will be granted if the complaint on its face fails to allege facts sufficient to establish subject matter jurisdiction. See Savage v. Glendale Union High Sch., 343 F.3d 1036, 1039 n.2 (9th Cir. 2003). In considering a Rule 12(b)(1) motion, the Court "is not restricted to the face of the pleadings, but may review any evidence, such as affidavits and testimony, to resolve factual disputes concerning the existence of jurisdiction." McCarthy v. United States, 850 F.2d 558, 560 (9th Cir. 1988). Once a party has moved to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1), the opposing party bears the burden of establishing the court's jurisdiction, see Chandler v. State Farm Mut. Auto. Ins. Co., 598 F.3d 1115, 1122 (9th Cir. 2010), by putting forth "the manner and degree of evidence required" by whatever stage of the litigation the case has reached, Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992).

B. Leave to Amend

If the Court determines that the complaint should be dismissed, it must then decide whether to grant leave to amend. Under Rule 15(a) of the Federal Rules of Civil Procedure, leave to amend "should be freely granted when justice so requires, " bearing in mind that "the underlying purpose of Rule 15... [is] to facilitate decision on the merits, rather than on the pleadings or technicalities." Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc) (internal quotation marks omitted). Nonetheless, a court "may exercise its discretion to deny leave to amend due to undue delay, bad faith or dilatory motive on part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing ...

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