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BGH Holdings, LLC v. DL Evans Bank

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

June 14, 2019

BGH HOLDINGS, LLC et al., Plaintiffs,
DL EVANS BANK, Defendant.


          Robert S. Lasnik, United States District Judge

         This matter comes before the Court on plaintiffs' “Motion to Strike Pleading, ” Dkt. #20, plaintiffs' “Motion to Dismiss Added Parties for Failure to Serve, ” Dkt. #27, and defendant's “Motion for Relief from Deadline for Joining Additional Parties.” Dkt. #30.


         On September 25, 2018, plaintiffs BGH Holdings, LLC (“BGH”), Ginger Atherton and Henry Dean filed a First Amended Complaint against DL Evans Bank (“the Bank”). Dkt. #4 (Compl.). According to the complaint, in September 2017, the Bank registered a default judgment dated January 12, 2010 in the King County Superior Court that it had “knowingly obtained against plaintiff Dean in Idaho without due process of law.” Id. at ¶ 2.4. The Superior Court entered a charging order requiring BGH to pay to the Bank any monies to which Dean was entitled through his member owner interests in BGH. Id. at ¶ 2.5. In August 2018, the Bank also caused the Superior Court to issue a writ of execution directing the King County Sheriff to enter the residence of plaintiffs Dean and Atherton and seize their personal property. Id. at ¶ 2.6. Plaintiffs bring claims for violations of their Fourth Amendment and Fourteenth Amendment rights under 42 U.S.C. § 1983, id. at ¶¶ 4.1-5.15, for conversion, id. at ¶¶ 6.1-6.2, for unjust enrichment, id. at ¶¶ 7.1-7.2, and for declaratory and injunctive relief regarding the right of execution under the Idaho Default Judgment. Id. at ¶¶ 8.1-8.2.

         The Bank filed its Answer, Affirmative Defenses and Counterclaims (“Answer”) on October 29, 2018. Dkt. #15. The Bank argues that it obtained a judgment against Dean in 2010 in the amount of $1, 063, 503.16, arising out of a failed real estate development. Id. at 1. Dean has been evading the Bank's attempts to collect on the Idaho Default Judgment and has transferred equities to BGH and Atherton in an attempt to further hinder, delay and defraud the Bank. Id. In its Counterclaims, the Bank requested declaratory judgment regarding the validity of the Idaho Default Judgment and its enforceability in Washington. Id. at 11-15. On November 21, 2018, the Court issued a Minute Order setting a deadline of December 19, 2018 for the joinder of parties. Dkt. #17.

         On December 27, 2018, the Bank filed its Amended Answer, Affirmative Defenses and Counterclaims (“Amended Answer”). Dkt. #18 (Countercl.). This added claims against WN3, LLC (“WN3”), Jim Dean (“Jim”), Frank Dean (“Frank”), and Does 1-5.[1] Id. at 11. WN3, on information and belief, is owned and managed by Atherton and was dissolved on July 1, 2016. Id. Jim and Frank are individuals residing or believed to be residing in Washington. Does 1-5 are “other persons, corporate or limited liability entities, trusts or other persons or entities to whom [plaintiff] Dean or the other Defendants have made intermediate or final fraudulent transfers.” Id at 11-12. The Bank brought six new claims under Washington's Uniform Voidable Transactions Act (“UVTA”) against BGH, Atherton, WN3, Jim, Frank, and Does 1-5, and a request for an injunction to prevent further fraudulent transfers. Countercl. at ¶¶ 53-82.

         Plaintiffs filed a motion to strike the Bank's Amended Answer on February 14, 2019, arguing that the Bank had violated Federal Rules of Civil Procedure 14(a)(1) and 15(a) and had purported to add new parties after the deadline for doing so had expired. Dkt. #20. While this motion was pending, on May 16, 2019, plaintiffs filed a “Motion to Dismiss Added Parties for Failure to Serve.” Dkt. #27. Plaintiffs argued that the Bank had failed to serve the additional parties or file a Praecipe to Issue Summons. Id. at 1. The Bank accordingly filed a “Motion for Relief from Deadline for Joining Additional Parties” on May 23, 2019. Dkt. #30. It requests relief from the deadline for joining additional parties and seeks leave to serve the additional parties. Id. at 2. As all three motions concern the proposed additional parties, the Court deals with them in a single order.


         A. Legal Standard

         “The district court is given broad discretion in supervising the pretrial phase of litigation.” Zivkovic v. S. California Edison Co., 302 F.3d 1080, 1087 (9th Cir. 2002) (quoting Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 607 (9th Cir. 1992)). Other than an amendment as a matter of course, “a party may amend its pleading only with the opposing party's written consent or the court's leave. The court should freely give leave when justice so requires.” Fed.R.Civ.P. 15(a)(2).[2] However, a case scheduling order may be modified “only for good cause and with the judge's consent.” Fed.R.Civ.P. 16(b)(4). For the purposes of Rule 16, “good cause” means that “the scheduling deadlines cannot be met despite the party's diligence.” Paz v. City of Aberdeen, No. C13-5104 RJB, 2013 WL 6163016, at *2 (W.D. Wash. Nov. 25, 2013) (citing Johnson, 975 F.2d at 609). “If the party seeking the modification was not diligent, the inquiry should end.” Id. (citing Millenkamp v. Davisco Foods Intern., Inc., 448 Fed.Appx. 720, 721 (9th Cir. 2011)).

         “A person who is subject to service of process and whose joinder will not deprive the court of subject-matter jurisdiction must be joined as a party if: (A) in that person's absence, the court cannot accord complete relief among existing parties; or (B) that person claims an interest relating to the subject of the action and is so situated that disposing of the action in the person's absence may: (i) as a practical matter impair or impede the person's ability to protect the interest; or (ii) leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest.” Fed.R.Civ.P. 19.

         If a defendant is not served within 90 days after a complaint is filed, the Court “must dismiss the action without prejudice against that defendant or order that service be made within a specified time. But if the plaintiff shows good cause for the failure, the court must extend the time for service for an appropriate period.” Fed.R.Civ.P. 4(m). “District courts have broad discretion to extend time for service under Rule 4(m).” Efaw v. Williams, 473 F.3d 1038, 1041 (9th Cir. 2007). “In making extension decisions under Rule 4(m) a district court may consider factors like a statute of limitations bar, prejudice to the defendant, actual notice of a lawsuit, and eventual service.” Id. (internal citation and quotation marks omitted).

         B. Addition of New Parties

         The Bank alleges in its counterclaims that Dean made several fraudulent transfers. He acquired stock and stock options in Hytech Power, Inc. (“Hytech”) during his employment with the company for the past four years. Countercl. at ¶¶ 18-19. He transferred approximately 50, 000 options in Hytech stock to Frank and Jim for no consideration. Id. at ¶ 20. He formed BGH on or about February 5, 2015. He transferred approximately 1.2-1.25 million shares of Hytech stock to BGH for less than their reasonably equivalent value. Id. at ΒΆΒΆ ...

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