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Green v. Blake

United States District Court, D. Kansas

August 12, 2019




         In this action among three members of an Oregon limited liability company, 63rd Street Enterprises, LLC (“the LLC”), Plaintiff Jeffrey S. Green-represented by an attorney who has handled various matters for the LLC-sues defendants Christian Blake and Joshua Leonard for allegedly: inducing him through misrepresentations to contribute $200, 000 to the LLC; breaching fiduciary duties owed to the LLC and its members; converting the LLC's assets for personal use; and failing to produce an accounting of the LLC's income and expenses. This court must now decide two interrelated motions: Defendants' Motion To Dismiss For Lack Of Subject Matter Jurisdiction And Other Reasons (Doc. 19) and Defendants' Motion to Disqualify Counsel (Doc. 9). Because plaintiff properly pleads one direct claim and improperly pleads three derivative claims, defendants' motion to dismiss is denied in part and granted in part. As that ruling makes the LLC's involvement in this suit unnecessary, and defendants establish no prior attorney-client relationship between themselves personally and plaintiff's counsel, defendants' motion to disqualify plaintiff's counsel is denied.

         I. Background

         A. Plaintiff's Complaint [1]

         63rd Street Enterprises, LLC is an Oregon limited liability company, formerly managed by two of its members, defendants Blake and Leonard. As managers of the LLC, defendants allegedly made various representations to plaintiff that induced plaintiff to contribute to and become a member of the LLC. Plaintiff alleges defendants fraudulently misrepresented their own assets and finances, the LLC's assets and finances, and their own receipt and use of the LLC's funds by:

• falsely representing their business acumen and that their personal assets could finance the LLC;
• misrepresenting that they had secured, on the LLC's behalf, “the assets and services of Mr. Marsden;”[2] and
• falsifying information about the LLC's finances to avoid discovery of (1) unapproved compensation they paid themselves for managing the LLC and (2) other unauthorized financial transactions and personal use of the LLC's funds.

         Plaintiff alleges that these actions misled him-“and other investors”-as to the LLC's viability and financial status, inducing him to contribute to the LLC investments totaling $200, 000.[3] Plaintiff characterizes the misdeeds underlying these misrepresentations as both a breach of the fiduciary duties that defendants owed “[a]s [m]anagers and officers of the [LLC]” and as unlawful conversion of “the [LLC's] inventory and property.” (Doc. 1, at 3, 7.) Plaintiff finally claims that defendants “have a duty” but have failed, despite his demands, “to account for the [LLC's] income and expenses.” (Doc. 1, at 8.)

         B. Procedural History

         Plaintiff, through his attorney, Joel B. Laner, filed this suit on May 11, 2018. A few months later, defendants filed a motion to disqualify Mr. Laner and all members of his law firm. (Doc. 9.) Defendants argued that Mr. Laner's representation of plaintiff was unfair and in violation of certain ethical rules because he allegedly had represented defendants in various matters related to various limited liability companies, including 63rd Street Enterprises, LLC. (Docs. 9 & 10.) Shortly thereafter, in the process of screening the case to verify its jurisdiction, the court issued an order requesting that the parties address four issues:

1. Do plaintiff's claims fall under Kansas's choice-of-law statute for foreign LLC's, such that Oregon law applies to the substantive claims?
2. Under the applicable law, are all or some of plaintiff's claims derivative in nature?
3. Is the LLC a necessary and/or indispensable party under Fed.R.Civ.P. 19?
4. How do the answers to the above questions impact the resolution of defendants' pending motion to disqualify plaintiff's counsel?

(Doc. 15, at 2.) Defendants answered these questions by way of their motion to dismiss plaintiffs' case. (Doc. 19.)

         II. Proceeding Pro Se

         Before turning to defendants' motions, the court would note that defendants represent themselves. Courts “afford a liberal construction to [filings] of a defendant appearing pro se.” Binford v. United States, 436 F.3d 1252, 1253 n.1 (10th Cir. 2006). “[T]his rule of liberal construction stops, however, at the point at which [the court] begin[s] to serve as [the pro se litigant's] advocate.” United States v. Pinson, 584 F.3d 972, 975 (10th Cir. 2009). As such, the court must not “construct arguments or theories for [defendants] in the absence of any discussion of those issues.” Drake v. City of Fort Collins, 927 F.2d 1156, 1159 (10th Cir. 1991) (citations omitted).

         III. Defendants' ...

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