United States District Court, C.D. California
Neil A. Vacchiano
Kevin W. Wessell, et al.
DALE S. FISCHER, District Judge.
Proceedings: (In Chambers) Order Granting Defendants' Oral Motion to Dismiss Based on Lack of Standing
In this diversity action, Plaintiff Neil Vacchiano asserts claims against Defendants Kevin W. Wessell and 1-800-Company relating to funds deposited into what Vacchiano believed was an overseas savings account at Alps Credit Union Economisk (The Alps). (Docket No. 35, First Amended Complaint (FAC) ¶¶ 18, 36-42.) This action is related to Alexander v. Incway Corp., et al., CV 11-8851 DSF (VBKx) (Alexander Action), (Docket No. 4), which involved the same Defendants and contained overlapping legal claims and factual issues, (Docket No. 168, Order re Pl.'s Mot. in Limine #1, at 1). Vacchiano testified in the bench trial of the Alexander Action, which was held before this Court in June 2013. (Alexander F&C ¶¶ 50-65.) Plaintiff filed a Motion in Limine to request that the Court adopt the Alexander F&C in the Vacchiano Action. (Docket No. 142.) The Court granted this motion in part, but expressly noted that this did not equate to a finding of relevance, "as the relevance of any issue depends on the evidence and argument presented by the parties at trial." (Order re Pl.'s Mot. in Limine #1 at 6.)
A one-day bench trial was held in the Vacchiano Action on January 7, 2014, to decide the remaining claims against Wessell and 1-800-Company: (1) negligence; (2) fraudulent inducement, fraud, and deceit; (3) negligent misrepresentation; (4) unlawful, unfair, and fraudulent business acts, in violation of California's Unfair Competition Law; (5) conversion; (6) unjust enrichment; (7) and money had and received. (Docket No. 171, Pl.'s Tr. Br., at 13-17; Docket No. 170, Defs.' Tr. Br., at 2-3.) Based on Vacchiano's Proposed Findings of Fact and Conclusions of Law, it appears that he now seeks resolution only of his claims for negligent misrepresentation and fraud. (Docket No. 190, Ex. A at 36 n.4.) Specifically, Vacchiano's Proposed Findings state that his negligence claim should be subsumed in his negligent misrepresentation claim, and notes that Vacchiano has not-and presumably will not-provide proposed conclusions of law on the other claims presented at trial. (Id.) In light of this, the Court will evaluate the remainder of the case only as to Plaintiff's claims for negligent misrepresentation and fraud.
At trial, Defendants moved for dismissal or judgment pursuant to their affirmative defenses of lack of standing and lack of indispensable party. (Docket No. 181, Rep.'s Tr. of Trial Proceedings (RT), at 122:5-16.) The Court took Defendants' motion under submission and allowed the parties to submit further briefing. (Id. at 122:17-20, 149:4-6.) Defendants assert that the money Vacchiano deposited into The Alps belonged to NV Custom Living, Inc., not Vacchiano. (Defs.' Real Party Br. at 4.) Specifically, these funds came from two certificate of deposit (CD) accounts in the name of NV Custom Living. (Id. at 5.) Because he did not own these funds, Vacchiano was not damaged by their loss, and is not the real party in interest under Federal Rule of Civil Procedure (Rule) 17(a). (Id.) Defendants raised this challenge in their answer, (Docket No. 51 ¶159),  in a "Notice of Objection Against Named Plaintiff Neil A Vacchiano As Not the Real Party in Interest Pursuant to Federal Rules of Civil Procedure 17, " (Docket No. 114), in Defendants' Memorandum of Contentions of Fact and Law, (Docket No. 136 at 29), in the parties' proposed Final Pretrial Conference Order, (Docket No. 156-1 at 44), and during the January 6, 2014 hearing on Defendants' Motion to Amend/Correct Pretrial Order, (Docket No. 179 at 4, 8).
Vacchiano responds that:
(1) Defendants have waived this defense by failing to assert it against Vacchiano's testimony during the Alexander Trial, (Docket No. 191, Pl.'s Real Party Br., at 2);
(2) NV Custom Living "effectively ratified" this action, and will provide "formal written ratification, " if required, (id. at 3);
(3) although the funds deposited "technically" came from accounts in NV Custom Living's name, they were "effectively personal funds to Vacchiano" and contained funds belonging to another entity owned by Vacchiano, (id.); and
(4) NV Custom Living is the alter ego of Vacchiano, (id. at 4-7). Plaintiff also submitted a Supplemental Post-Trial Brief, which attached a document titled "Consent of the Stock Holders and Directors to the Action of the Corporation, " in which NV Custom Living purportedly "formally ratified this action by Plaintiff and has disclaimed any interest in the lawsuit and in any judgment obtained or monies collected from it." (Docket No. 201, Ex. A.)
As stated above, the Court need only evaluate Defendants' motion for dismissal or judgment as to Vacchiano's remaining claims for negligent misrepresentation and fraud.
II. LEGAL STANDARD
Rule 17 requires that "[a]n action must be prosecuted in the name of the real party in interest." Fed.R.Civ.P. 17(a)(1). A plaintiff lacks "prudential standing" if he is not asserting his "own legal interests as the real party in interest...." Dunmore v. United States , 358 F.3d 1107, 1112 (9th Cir. 2004) (citation omitted). In cases where the court exercises federal diversity jurisdiction, whether a plaintiff is a "real party in interest" under Rule 17(a) depends on whether the plaintiff is "a proper party to maintain [the] action under applicable state law.... It is well settled that a federal court exercising diversity jurisdiction must apply substantive state law." Allstate Ins. Co. v. Hughes , 358 F.3d 1089, 1093-94 (9th Cir. 2004) (citations omitted) (ellipsis in original); see also Glacier Gen. Assur. Co. v. G. Gordon Symons Co. , 631 F.2d 131, 133-34 (9th Cir. 1980) ("Fed.R.Civ.P. 17(a) requires that every action be prosecuted in the name of the real party in interest. The identity of the real party in interest, however, ...