United States District Court, W.D. Washington, Tacoma
ORDER ON CROSS-MOTIONS FOR PARTIAL SUMMARY JUDGMENT
AND ON MOTION TO COMPEL
B. LEIGHTON UNITED STATES DISTRICT JUDGE
MATTER is before the Court on Plaintiff Henry Luken's
Motion for Partial Summary Judgment [Dkt. #114] as well as
CSL Defendants' Motion for Partial Summary Judgment [Dkt.
#138] and Motion to Compel Production of Documents [Dkt.
#118]. The underlying lawsuit involves numerous complicated
claims and counterclaims over who is financially responsible
for the failure of luxury yacht builder Christensen
Shipyards. Luken alleges that the CSL Defendants engaged in
mismanagement and fraud ultimately driving CSL into
insolvency. The CSL Defendants characterize Luken as a
corporate raider who is attempting to complete his hostile
takeover of CSL through this litigation. The present summary
judgment motions relate to claims stemming from a 2001
Guaranty between Luken and Defendant David Christensen,
Luken's claims under Washington's vessel dealer trust
account statute (RCW § 88.02.770), and CSL
Defendants' intentional interference and shareholder
judgment is proper if the pleadings, the discovery and
disclosure materials on file, and any affidavits show that
there is no genuine issue as to any material fact and that
the movant is entitled to judgment as a matter of law.
See Fed. R. Civ. P. 56. In determining whether an
issue of fact exists, the Court must view all evidence in the
light most favorable to the nonmoving party and draw all
reasonable inferences in that party's favor. Anderson
Liberty Lobby, Inc., 477 U.S. 242, 248-50 (1986);
Bagdadi v. Nazar, 84 F.3d 1194, 1197 (9th Cir.
1996). A genuine issue of material fact exists where there is
sufficient evidence for a reasonable factfinder to find for
the nonmoving party. Anderson, 477 U.S. at 248. The
inquiry is “whether the evidence presents a sufficient
disagreement to require submission to a jury or whether it is
so one-sided that one party must prevail as a matter of
law.” Id. at 251-52. Factual disputes whose
resolution would not affect the outcome of the suit are
irrelevant to the consideration of a motion for summary
judgment. Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248 (1986). The moving party bears the initial burden of
showing that there is no evidence which supports an element
essential to the nonmovant's claim. Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986). Once the movant has
met this burden, the nonmoving party then must show that
there is a genuine issue for trial. Anderson, 477
U.S. at 250. If the nonmoving party fails to establish the
existence of a genuine issue of material fact, “the
moving party is entitled to judgment as a matter of
law.” Celotex, 477 U.S. at 323-24.
LUKEN'S MOTION FOR PARTIAL SUMMARY JUDGMENT
moves for summary judgment on several issues related to a
2001 Guaranty agreement between David Christensen and Luken,
on Defendants' intentional interference with contract
claim (Fourth Counterclaim), and on Defendants'
shareholder oppression claim (First Counterclaim).
Claims related to the 2001 Guaranty between David Christensen
Christensen and Luken executed an agreement in 2001 in which
Luken provided financing to CSL for the construction of two
spec boats and Christensen guaranteed CSL's loan
obligations. Dkt. 114 at 4; Dkt. 114-1; Dkt. 130 at 7. The
language of the Guaranty provides:
obligations of the Guarantor under this Agreement shall be
absolute and unconditional, notwithstanding any notice of
discontinuance delivered to the Lender, and shall remain in
full force and effect until all the Obligations shall have
been paid or satisfied in full . . . .
114-1 at 2.
argues that the language in the agreement entitles him a
broad and continuing guaranty of all indebtedness of any kind
that CSL may owe him in the future. Dkt. 114 at 4. Luken
contends that he is entitled to the $11.7 million maximum
under the Guaranty and seeks summary judgment on several
claims and defenses related to the Guaranty. Id. at
Defendants assert that the 2001 Guaranty only applied to loan
obligations that CSL, as a borrower, owed to Luken, as a
lender (as opposed to any obligation CSL had as a yacht
seller to Luken as a yacht buyer). Dkt. 130 at 7-8.
Defendants also contend that CSL satisfied the Guaranty by
repaying all loan obligations in 2008.
Court's review of the record reveals a genuine dispute of
material fact as to whether or not the Guaranty was
satisfied. Because the parties dispute whether CSL repaid
Luken and satisfied its obligations under the Guaranty,
summary judgment is inappropriate at this juncture.
Accordingly, Luken's motion for partial summary judgment
as it relates to the 2001 Guaranty [Dkt. 114 at
¶¶1-4] is DENIED.
Intentional Interference Counterclaim
moves for summary judgment on Defendants' intentional
interference with economic relations counterclaim. This
counterclaim stems from a loan of approximately $1.1 million
that David Christensen made to CSL in December 2011.
Defendants allege that Luken abused his corporate position
and engaged in a course of misconduct before and after the
loan was made resulting in CSL's insolvency and
subsequent inability to repay the loan. Dkt. 97 at 44-46.
state a claim for intentional interference, a plaintiff must
set forth the following elements: (1) the plaintiff was
engaged in a valid contractual relationship or business
expectancy; (2) the defendant knew of this relationship; (3)
the defendant acted intentionally in inducing a breach or
termination of the relationship; (4) the defendant was
motivated by an improper purpose or used improper means; and
(5) the plaintiff suffered damages as a result of the
interference. Kische USA, LLC v. Simsek, No.
C-16-0168JLR, 2016 WL 6273261, *9 (W.D. Wash. June 29, 2016);
Libera v. City of Port Angeles, 316 P.3d 1064, 1068
suggests that CSL Defendants cannot establish all elements of
their intentional allegations of misconduct or improper
purpose by Luken; (2) that simply contributing to CSL's
inability to repay a loan is not actionable interference; and
(3) that Defendants cannot show causation or damages. Dkt.
114 at 21-22. These arguments lack merit.
Defendants present ample evidence of misconduct and improper
purpose that goes beyond contributing to CSL's inability
to repay the loan. This includes evidence or testimony which
suggests Luken inflated the trade-in values on hull
contracts, misappropriated CSL funds for personal expenses,
forced CSL to sell the yacht Cacique to him at a loss, and
provided insider information on CSL to his friends to the
harm of CSL. Viewing the evidence in a light most favorable
to the nonmoving party, a reasonable jury could find that
Luken, motivated by improper purpose, engaged in a course of
intentional conduct which caused CSL to default on its loan
and harm Christensen. The Court determines that the CSL
Defendants present sufficient evidence to satisfy the
elements of their intentional interference counterclaim.
There are genuine issues of material fact on this
counterclaim that need to be resolved at trial. Accordingly,
Luken's motion for partial summary judgment on the
intentional interference counterclaim [Dkt. 114 at ¶5]
Shareholder Oppression Counterclaim
Defendants David Christensen, Joe Foggia, and Cindi Curtin
assert a counterclaim for shareholder oppression alleging
that Luken, as CSL's controlling shareholder, abused his
corporate position for his own personal benefit and engaged
in oppressive conduct to the harm of CSL's minority
shareholders. Dkt. 97 at 37-39. Christensen, Foggia, and
Curtin contend that an award of damages is warranted for
Luken's allegedly oppressive conduct considering that
equitable remedies are insufficient given that CSL has been
placed in receivership and liquidated. Dkt. 130 at 28-29.
Luken moves for summary judgment on this claim, arguing his
alleged misconduct is either not actionable or falls outside
the statute of limitations. Dkt. 114 at 22-25.
Business Corporation Act authorizes the superior courts to
dissolve a corporation if “the directors or those in
control of the corporation have acted . . . in a manner that
is illegal, oppressive, or fraudulent.” Wash. Rev. Code
§ 23B.14.300. Because the statute does not define the
term “oppressive, ” Washington courts look to
both a “reasonable expectations” test and a
“fair dealing” test to evaluate whether a
corporate director or controlling shareholder has engaged in
oppressive conduct. Scott v. Trans-System, Inc., 64
P.3d 1, 6 (Wash. 2003); Miller v. Robertson, 93
Wash.App. 1089 (Wash.Ct.App. 1999). The “reasonable
expectations” test “defines shareholder
oppression as a violation by the majority of the reasonable
expectations of the minority, ” and is “most
appropriate in situations where the complaining shareholder
was one of the original participants in the venture-one who
would have committed capital and resources.”
Scott, 64 P.3d at 6 (citing Gimpel v.
Bolstein, 477 N.Y.S.2d 1014, 1018 (N.Y. Sup. Ct. 1984)).
The “fair dealing” test characterizes oppressive
burdensome, harsh and wrongful conduct; a lack of probity and
fair dealing in the affairs of a company to the prejudice of
some of its members; or a visible departure from the
standards of fair dealing, and a violation of fair play on
which every shareholder who entrusts his money to a company
is entitled to rely.
The two tests are not mutually exclusive and either or both