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Mansha Consulting LLC v. Alakai

United States District Court, D. Hawaii

February 16, 2017

MANSHA CONSULTING LLC, Plaintiff,
v.
CLIFF ALAKAI, et al., Defendants.

          ORDER GRANTING DEFENDANT TOM MATSUDA, INDIVIDUALLY, AND AS A DIRECTOR AND/OR OFFICER OF HAWAII HEALTH CONNECTOR'S MOTION TO DISMISS COMPLAINT FILED OCTOBER 28, 2016 AND GRANTING DEFENDANTS CLIFF ALAKAI AND JEFFREY KISSEL'S PRE-ANSWER MOTION TO DISMISS FILED ON OCTOBER 28, 2016

          Alan C. Kay Sr. United States District Judge

         For the reasons discussed below, the Court GRANTS Defendant Tom Matsuda, Individually, and as a Director and/or Officer of Hawaii Health Connector's Motion to Dismiss Complaint Filed October 28, 2016, ECF No. 12, to which Defendants Cliff Alakai and Jeffrey Kissel filed a joinder, ECF No. 21, and GRANTS Defendants Cliff Alakai and Jeffrey Kissel's Pre-Answer Motion to Dismiss Complaint Filed on October 28, 2016, ECF No.

         FACTUAL BACKGROUND

         In 2010, the Affordable Care Act (“ACA”) required states to establish health exchanges to facilitate, for individuals and entities, the selection, purchase, and enrollment in private health insurance plans. Compl. ¶ 13, ECF No. 1. As a result, the State of Hawaii established the Hawaii Health Connector (“HHC” or the “Connector”), the State's health insurance exchange. Id. ¶ 14. To assist with its obligations, and in particular, to implement necessary information technology programs and systems, HHC retained Plaintiff Mansha Consulting, LLC (“Mansha” or “Plaintiff”). Id. ¶¶ 12, 16, 17.

         Mansha entered into a contract with HHC (the “IPMO Contract”) which totaled over 21 million dollars. Id. ¶ 17. The IPMO Contract was funded through grants from the federal government, and accordingly, payment to Mansha was to be supplied by the Centers for Medicare and Medicaid Services (“CMS”), the responsible federal agency. Id. ¶ 18. Mansha began work under the IPMO contract on or around April 2013. Id. ¶ 19. On September 1, 2014 and thereafter, HHC failed to forward Mansha's invoices for payment. Id. ¶ 20. Following several months of unpaid invoices, each of which was in the amount of $677, 842.61 plus excise taxes, Mansha on or around December of 2014, was unable to continue to perform under the IPMO Contract because of financial constraints. Id. ¶ 21. From July 2014 to December 2014, Mansha continued its work under the contract based on assurances by the Defendants, who were directors and/or officers of HHC, that payment would be made to Mansha based on its invoices. Id. ¶¶ 12, 21.

         Eventually, HHC collapsed. Id. ¶ 22. Since HHC's collapse, Mansha has attempted to recover its losses by demanding compensation from HHC, contacting CMS directly, and communicating with other relevant third parties. Id.

         In relation to Defendants actions in mishandling the invoice payments, Mansha alleges that Defendants were negligent and breached their fiduciary duties. Id. ¶ 23. As a result, Mansha claims, inter alia, that its value as a company has been diminished, a pending acquisition of Mansha was derailed, and that it has lost millions of dollars. Id.

         With respect to the specific Defendants at issue in the instant Motions to Dismiss, the Complaint contains the following allegations.

         Defendant Cliff Alakai (“Alakai”) was the Chairman of the Board of Directors for HHC during the relevant time period and at some point served as Treasurer for the Board of Directors. Id. ¶ 26(a). Alakai's duties in this role included ensuring proper operation of HHC. Id. ¶ 26(c). Mansha informed Alakai that the invoices were not being forwarded to CMS. Id. ¶ 26(b). Alakai failed to properly manage and oversee HHC with respect to the handling of invoices and the issues raised by Mansha, and took no actions to correct the issues. Id. ¶¶ 26(d), (e).

         Defendant Tom Matsuda (“Matsuda”) was the Interim Executive Director of HHC “from a date unknown” until approximately October of 2014. Id. ¶ 27(a). Matsuda's duties in this role included responsibility over the overall administration of HHC including financial, personnel, and operational requirements. Id. ¶ 27(b). Matsuda failed to investigate and resolve the ongoing issues faced by Mansha and misinformed Mansha about the reasons for delay of payment. Id. ¶ 27(d).

         In particular, Matsuda negligently misinformed Mansha that the invoices were not being forwarded to CMS because there was a restriction on funds initiated by either CMS or HHC. Id. ¶¶ 27(d), (e). Mansha later learned that although such a restriction may have existed for a short period of time, the restrictions had been cleared and its invoices could have been paid. Id. ¶ 27(d). As a result of this misinformation, Mansha was unable to take action which would have resulted in proper payment. Id. Matsuda also made erroneous assurances to Mansha that it would be paid on its submitted invoices. Id. ¶ 27(f).

         Defendant Jeffrey Kissel (“Kissel”) was HHC's Executive Director starting in October of 2014. Id. ¶ 28(a). Kissel failed to properly ensure investigation and resolution of ongoing issues faced by Mansha. Id. ¶ 28(c). Kissel made similar statements as Matsuda regarding the reasons for delay, including misinforming Mansha about the restrictions on funds. Id. ¶¶ 28(d), (e). In addition, Kissel erroneously reassured Mansha that it would be paid according to its submitted invoices.[1] Id. ¶ 28(e).

         PROCEDURAL BACKGROUND

         Plaintiff filed a Complaint against Defendants on October 28, 2016. The Complaint raises claims for negligence and breach of fiduciary duty against all Defendants.

         On December 5, 2016, Matsuda filed a Motion to Dismiss Complaint Filed October 28, 2016. ECF No. 12. Mansha filed its Opposition on December 30, 2016. ECF No. 19. Alakai and Kissel filed a Non-Substantive Joinder to Matsuda's Motion to Dismiss on December 30, 2016. ECF No. 21. Matsuda filed a Reply on January 20, 2017. ECF No. 26.

         On December 30, 2016, Alakai and Kissel filed a Pre-Answer Motion to Dismiss Complaint Filed on October 28, 2016. ECF No. 20. Plaintiff filed its Opposition on January 13, 2017. ECF No. 25. Alakai and Kissel filed a Reply on January 20, 2017. ECF Nos. 27-28. On January 20, 2017 Matsuda filed a Non-Substantive Joinder to Defendants Alakai and Kissel's Reply. ECF No. 29.

         The Court held a hearing on both Motions to Dismiss on February 2, 2017.

         STANDARD

         I. Rule 12(b)(6)

         Federal Rule of Civil Procedure (“Rule”) 12(b)(6) authorizes the Court to dismiss a complaint that fails “to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). 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).

         In resolving a Rule 12(b)(6) motion, the Court must construe the complaint in the light most favorable to the plaintiff and accept all well-pleaded factual allegations as true. Sateriale v. R.J. Reynolds Tobacco Co., 697 F.3d 777, 783 (9th Cir. 2012). The complaint “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “The plausibility standard . . . asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. “Where a complaint pleads facts that are ‘merely consistent with' a defendant's liability, it ‘stops short of the line between possibility and plausibility of entitlement to relief.'” Id. (quoting Twombly, 550 U.S. at 557).

         When the Court dismisses a complaint pursuant to Rule 12(b)(6) it should grant leave to amend unless the pleading cannot be cured by new factual allegations. OSU Student All. v. Ray, 699 F.3d 1053, 1079 (9th Cir. 2012).

         II. Statute of Limitations

         “A claim may be dismissed as untimely pursuant to a 12(b)(6) motion ‘only when the running of the statute [of limitations] is apparent on the face of the complaint.'” U.S. ex rel. Air Control Techs., Inc. v. Pre Con Indus., Inc., 720 F.3d 1174, 1178 (9th Cir. 2013) (alteration in original) (quoting Von Saher v. Norton Simon Museum of Art at Pasadena, 592 F.3d 954, 969 (9th Cir. 2010)). Moreover, “a complaint cannot be dismissed unless it appears beyond doubt that the plaintiff can prove no ...


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