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LLC v. Kawish, LLC

United States District Court, W.D. Washington, Seattle

April 8, 2015

395 LAMPE, LLC, et al. Plaintiffs, Counterclaim Defendants,
v.
KAWISH, LLC, et al., Defendants, Counterclaim Plaintiffs, Third-Party Plaintiffs,
v.
WAYNE L. PRIM, et al., Third-Party Defendants.

ORDER

RICHARD A. JONES, District Judge.

I. INTRODUCTION

This matter comes before the court on the Prim Entities' motion to compel joinder of a claim pending in King County Superior Court and the Blixseth Entities' motion to remand this action to King County Superior Court. For reasons stated herein, the court DENIES both motions. Dkt. ## 181, 191. This order concludes with instructions to the Prim Entities to dispose of the Collateral WPT Interest, seek court approval for a disposition of that interest, or show cause why the court should not initiate proceedings to determine the consequences of their failure to effect a disposition of the Collateral WPT Interest.

II. BACKGROUND & ANALYSIS

The court proceeds, as it consistently has, on the assumption that the principal dispute underlying the morass of claims and counterclaims between the Blixseth Entities and the Prim Entities is a dispute over the proper disposition of what the court has called the Collateral WPT Interest. The Collateral WPT Interest, a one-third interest in a limited liability company called Western Pacific Timber, once belonged to the Blixseth Entities, who pledged it as collateral for a series of loans from the Prim Entities. It now belongs to the Prim Entities, who seized it when the Blixseth Entities defaulted on those loans. Perhaps the court is mistaken in its assumption about the centrality of this dispute; but the parties have never suggested another way to bring this case to a resolution. Indeed, the parties seem disinterested in bringing this case to a resolution.

To illustrate the parties' disinterest, the court notes that when it last considered the dispute over the Collateral WPT Interest, in July 2014, it noted various concerns about the Prim Entities' plan to sell that interest at an "auction" where one of the Prim Entities was all but certain to be the only bidder. But the court did not resolve those concerns, because an entity called Keewaydin, which stands in the shoes of those who own another one-third interest in WPT, intervened to assert that the Prim Entities could not dispose of the Collateral WPT Interest at all because of limitations in the WPT operating agreement. The court put the central dispute on hold, so that it could address the dispute between the Prim Entities and Keewaydin. That was a frustrating process, as described in a series of the court's orders in September and October 2014. But perhaps it ended well, because in December 2014, Keewaydin voluntarily dismissed its claims with prejudice. 2014 ended with a statement from the Prim Entities that they "intend[ed] to proceed with a public sale of the [Collateral WPT Interest], " presumably with Keewaydin's consent. That was December 30. Since then, the court has no indication that the Prim Entities have done anything to dispose of the Collateral WPT Interest.

A. The Parties Have Started a New Dispute in State Court.

Why the delay? Surely not because of the motions now pending before the court, which have nothing to do with the disposition of the Collateral WPT Interest. Those motions instead concern the Prim Entities' efforts to seize other collateral from the Blixseth Entities. After this District's bankruptcy court dismissed two bankruptcy actions in which the Blixseth Entities sought to protect a mansion in Medina secured by a deed of trust to one of the Prim Entities, the Prim Entities sought to foreclose that deed of trust. They succeeded, it appears. The mansion sold in a June 2014 foreclosure sale in which one of the Prim Entities was apparently the sole bidder.

The Blixseth Entities sued the Prim Entities (and the foreclosure trustee) in King County Superior Court. They asked that court to set aside the trustee's sale, among other relief. The Prim Entities filed a motion to dismiss that was almost entirely successful. In an October 6, 2014 order, the Superior Court dismissed the complaint except as to one narrow issue. It held that the Blixseth Entities could continue to pursue a claim for declaratory judgment in which Tim Blixseth sought "a determination of his personal liability, as guarantor pursuant to RCW 61.24.100(5), through the establishment of the fair value of the [Medina] property at the time of sale." It also allowed the Prim Entities to pursue a claim for damages caused by the Blixseth Entities' wrongful filing of a lis pendens on the Medina property.

The Superior Court also stayed the action "to allow any party to move the federal court to accept supplemental jurisdiction of this matter." The court understands the impetus for that order. The Medina mansion was collateral for many of the same loans for which the Collateral WPT Interest was collateral. The Blixseth Entities insist that the Collateral WPT Interest is worth enough money to extinguish all of their debts. They have so far had no success in proving that assertion, but they have made it again in the state court. The dispute over the value of the Medina mansion, like the dispute here, is one in which a court must determine the value of collateral the Prim Entities seized to determine how much the Blixseth Entities still owe. It would be sensible to resolve that dispute in this court. The problem is that that Blixseth Entities have not chosen that sensible approach.

B. The Court Cannot Expand This Action by "Compelling Joinder" of the Blixseth Entities' State Law Claims, and It Will Not Remand this Action to State Court.

Two motions followed the Superior Court's invitation: one that that court cannot grant, and one that the court will not grant. The first was the Prim Entities' "motion to compel joinder" of the claims the Blixseth Entities asserted in state court. The Prim Entities ask the court to order the Blixseth Entities to bring their most recent state court claims here.

1. Motion to Compel Joinder

The court is aware of no authority that permits a federal district court to "compel joinder" of state law claims. That is so even if the court would have jurisdiction over those claims if they were brought before it. The Prim Entities insist that the court has supplemental jurisdiction over those claims, because they relate to the claims in this action. But the Prim Entities have put the cart before the horse. The court cannot consider whether it has jurisdiction over a claim until someone brings that claim before it. Federal law provides many mechanisms to bring claims before it. A party can voluntarily bring its claims to federal court. Where a removal statute applies, a defendant can bring a plaintiff's claims to federal court. The Prim Entities have not removed the Superior Court action, and they do not suggest they can do so. The court can compel the joinder of a "required party" via Rule 19 of the Federal Rules of Civil Procedure, but there is no suggestion that ...


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