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LLC v. Irongate Azrep BW LLC

United States District Court, D. Hawaii

February 10, 2017

SUNDAY'S CHILD, LLC, SUNDAY'S THIRD CHILD, LLC, SUNDAY'S FOURTH CHILD, LLC, and SUNDAY'S FIFTH CHILD, LLC, Plaintiffs,
v.
IRONGATE AZREP BW LLC, Defendant.

          ORDER DENYING DEFENDANT IRONGATE AZREP BW LLC'S MOTION TO DISMISS COUNTS III, IV, V, VI AND VII OF PLAINTIFFS' COMPLAINT

          Derrick K. Watson United States District Judge.

         INTRODUCTION

         The Sunday's Companies[1] allege various state-law claims arising out of the purchase of condominium units from developer and seller Irongate AZREP BW LLC (“Irongate”). Irongate seeks dismissal of the claims for conversion and unjust enrichment because they are redundant of the facts and duties at issue in Plaintiffs' breach of contract claims. According to Irongate, the Sunday's Companies have an adequate remedy at law through their contract claims and, therefore, neither tort damages nor equitable remedies are available.

         Although the Sunday's Companies may not recover twice for the same injury in contract, tort or any other theory of liability, their claims for conversion and unjust enrichment are sufficiently alleged as alternatives to their claims for breach of contract. Accordingly, Irongate's Motion to Dismiss is denied with respect to Counts III and V.

         Further, because the parties agree that the Court's previous dismissal of Counts IV, VI, and VII is unaffected following remand from the United States Court of Appeals for the Ninth Circuit, Irongate's Motion to Dismiss is denied as moot as to those claims.

         BACKGROUND

         I. Plaintiffs' Complaint

         The Sunday's Companies seek to recover deposits paid under Sales Contracts for four condominium units in the Trump International Hotel & Tower at Waikiki Beach Walk (“Project”). Irongate, the Project's developer, contends that it is entitled to retain the deposits following a Settlement Agreement between the parties and Plaintiffs' acknowledged failure to close.

         The Complaint alleges that in November 2006, the Sunday's Companies executed separate Sales Contracts to purchase the four Project units, advancing twenty percent of the purchase price as a deposit to Irongate. Complaint ¶¶ 9-10. The Sunday's Companies' failure to perform their contractual obligations entitled Irongate to terminate the contract. In that event, the Sales Contracts permitted Irongate to retain fifteen percent of the sales prices of the units with any deposit overage being returned to the purchaser. Complaint ¶¶ 12-13.

         In July 2009, a series of disputes arose between Irongate and several purchasers, including the Sunday's Companies. On May 13, 2011, the Sunday's Companies entered into a Settlement Agreement with Irongate that resolved their dispute. Complaint ¶¶ 14-16. According to the Sunday's Companies, the Settlement Agreement did not modify the Sales Contracts, including Irongate's obligation to return any deposits exceeding fifteen percent of the sales price in the event of termination. Complaint ¶¶ 18-19.

         After executing the Settlement Agreement, changing the units to be purchased, and making an additional $50, 000 deposit, the Sunday's Companies were not successful in their attempts to secure financing to complete their transaction. Unable to finance and close on the units, Irongate elected to terminate the Sales Contracts on June 23, 2011. The Sunday's Companies demanded that Irongate return all deposits in excess of fifteen percent of the sales price, but Irongate declined to do so. Complaint ¶¶ 20-26.

         The Sunday's Companies allege that Irongate breached the Sales Contracts by failing to return the excess deposits and to release certain escrow funds to them (Count I), and seek a declaration to the same effect (Count II). The Complaint also asserts claims for conversion (Count III), tortious breach of contract (Count IV), unjust enrichment (Count V) and breach of the implied covenant of good faith and fair dealing (Count VII), and seeks punitive damages (Count VI).

         II. Prior Rulings

         In a February 4, 2014 Order, the Court granted Irongate's motion to dismiss. The Court found that, because the claims asserted in this action arise out of the purchase and sale of the units, the Sunday's Companies waived and released their deposit and escrow claims when they entered into the Settlement Agreement.[2] See Dkt. No. 22 (2/4/14 Order).

         The Court dismissed the claim for breach of contract (Count I), and likewise concluded that, to the extent the Sunday's Companies' remaining claims for declaratory relief (Count II), conversion (Count III), tortious breach of contract (Count IV), unjust enrichment (Count V), and breach of the implied covenant of good faith and fair dealing are covered by the Settlement Agreement, they likewise failed, because they sought the recovery of deposits paid pursuant thereto. Additionally, the Court dismissed the claim for punitive damages, which cannot be maintained as a stand-alone cause of action (Count VI). See Dkt. No. 22 at 11-12 (2/4/14 Order).

         In a November 15, 2016 memorandum disposition, the Ninth Circuit reversed the Court's February 4, 2014 Order, concluding instead that the Settlement Agreement is ambiguous as to the extent to which the Sunday's Companies' claims are barred, and remanded for further proceedings. See Dkt. No. 43. The Sunday's Companies did not appeal and the Ninth Circuit's ruling did not disturb the Court's dismissal of Count IV (tortious breach of contract), Count VI (punitive damages), and Count VII (breach of the implied covenant of good faith and fair dealing).

         Irongate now seeks dismissal of the Sunday's Companies' non-contract claims, arguing that Hawaii law does not allow for recovery in tort or in equity where the parties' rights and claims are governed by contract.

         STANDARD OF REVIEW

         Federal Rule of Civil Procedure 12(b)(6) authorizes the Court to dismiss a complaint that fails “to state a claim upon which relief can be granted.” Rule 12(b)(6) is read in conjunction with Rule 8(a), which requires only “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). The Court may dismiss a complaint either because it lacks a cognizable legal theory or because it lacks sufficient factual allegations to support a cognizable legal theory. Balistreri v. Pacifica Police Dep't., 901 F.2d 696, 699 (9th Cir. 1988).

         Pursuant to Ashcroft v. Iqbal, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” 555 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 554, 570 (2007)). “[T]he tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” Id. Accordingly, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. (citing Twombly, 550 U.S. at 555). Rather, “[a] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). Factual ...


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