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Johnson v. Myers

United States District Court, N.D. California

June 30, 2017

JAMES R. JOHNSON, an individual, Plaintiff,
v.
STEVEN L. MYERS, an individual dba MYERS ENGINEERING INTERNATIONAL, INC., a business entity believed to be incorporated, STEPHEN A. BURKE, an individual, VORTIS TECHNOLOGY, LTD., a corporation duly organized under the laws of Great Britain, MYERS JOHNSON INC., a California corporation, and DOES 1-50, Defendants.

          ORDER GRANTING DEFENDANTS' MOTION TO DISMISS

          WILLIAM ALSUP UNITED STATES DISTRICT JUDGE.

         INTRODUCTION

         This is a sequel lawsuit to litigation lost by our plaintiff five years ago, recast as a quiet title action. This order holds that the claims asserted may not be resurrected.

         STATEMENT

         In January 2011, plaintiff James R. Johnson and eighteen other shareholder plaintiffs filed an action in federal court in San Jose against defendants Steven Myers and Myers Engineering International, Inc. (“MEI”) (see Def.'s RJN, Exhs. 1-3). Johnson v. Myers, No. C-11-00092 WHA (“Johnson I”). That complaint asserted claims for (1) breach of fiduciary duty, (2) misrepresentation and concealment, (3) fraudulent misrepresentation and concealment, (4) negligence, (5) breach of contract, (6) violation of Section 17200 of the California Business and Professions Code, and (7) conversion (Exh. 1). The claims derived from the allegedly fabricated insolvency of Scottish company Vortis Technology, Ltd., which Myers allegedly orchestrated to fraudulently transfer the company's technology to himself.[*]

         Judge Jeremy Fogel held British law applied to all claims except plaintiffs' breach of contract claim because they were based upon Myers's activities as director or manager of Vortis and concerned the internal affairs of Vortis. Judge Fogel therefore dismissed those claims without leave to amend because plaintiffs could not bring a derivative claim under British law “[o]nce a company has been dissolved or ceased to exist.” The plaintiffs “were required to seek remedy . . . through the liquidator during the liquidation proceeding” (Exh. 2 at 16).

         Judge Fogel also dismissed the breach of contract claim under California law because plaintiffs failed to show that they made the necessary demands to Vortis's board to take action (id. at 17). The order also concluded that the complaint failed to mention defendant MEI and therefore dismissed it with leave to amend as to MEI for lack of personal jurisdiction. The initial complaint was dismissed with leave to amend regarding the issue of intra-district venue because it was filed in San Jose. It was then reassigned to the undersigned judge.

         After additional briefing, the undersigned judge found that further amendment of the breach of contract claim would be futile. The plaintiffs did not show that any shareholder made a demand upon Vortis or the liquidators regarding a breach of contract claim as required for a derivative claim on behalf of Vortis. The claim was dismissed without leave to amend (Exh. 3). That occurred in 2012.

         Fast forward five years. Johnson filed the instant complaint in the Superior Court of California, County of San Mateo (Dkt. No. 1). He again named Myers and MEI as defendants and added Stephen A. Burke, Vortis Technology, Ltd., Myers Johnson, Inc. (“MJI”), and Does 1 through 50 as defendants. To the extent comprehensible, the complaint asserts claims for (1) declaratory relief, (2) quiet title, and (3) violation of Section 8723 of California's Corporation Code (see Dkt. No. 1 at 7, 10, 13-14, 16-18).

         In April 2017, Myers and MEI removed the action to federal court. As of the date of this order, the other defendants have not been served (Dkt. No. 1 at 2). Myers and MEI now move to dismiss the action for failure to state a claim. This order follows full briefing and oral argument.

         ANALYSIS

         1. Legal Standards.

         To survive a motion to dismiss, a plaintiff's claim must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim has facial plausibility when the party asserting it pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). While the court generally “may not consider any material beyond the pleading, ” Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1999), it “may consider material . . . relied upon in the complaint” or “subject to judicial notice.” Ellis v. Phillips ...


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