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State v. Stone

United States District Court, D. Hawaii

October 8, 2019

STATE OF HAWAI‘I, by its Office of Consumer Protection, Plaintiff,
v.
ROBERT L. STONE and CYNTHIA A. STONE, doing business as GAH Law Group, LLC, Defendants.

          ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF/COUNTERCLAIM DEFENDANT'S MOTION TO DISMISS COUNTERCLAIM, STRIKE JURY DEMAND, AND STRIKE PORTIONS OF THE ANSWER

          DERRICK K. WATSON, UNITED STATES DISTRICT JUDGE

         On May 30, 2019, the State of Hawai‘i, through its Office of Consumer Protection (OCP or Plaintiff), initiated this action against Robert and Cynthia Stone (collectively, Defendants), alleging violation of numerous federal and state laws. Thereafter, Robert Stone (Stone) answered and counterclaimed against OCP, including demanding a jury trial. In his counterclaims, Stone likewise alleges violations of both federal and state law. On August 26, 2019, OCP, inter alia, moved to dismiss Stone's counterclaims and to strike the demand for a jury trial (“the motion”).

         The motion presents several arguments with merit. First, as to Stone's claims under 42 U.S.C. Section 1983, the Court agrees that OCP is not a “person.” Second, the Court also agrees that none of Stone's counterclaims under state law assert a plausible claim and leave to amend would not change that. As a result, the motion is GRANTED to the extent it seeks dismissal of Stone's counterclaims. However, the Court does not agree that Stone has no right to a jury trial with respect to OCP's claims. In addition, because it is unnecessary at this stage of the proceedings to address whether certain of Stone's affirmative defenses should be stricken, the Court DENIES this aspect of the motion without prejudice to renewal.

         RELEVANT BACKGROUND

         OCP is a state civil law enforcement agency responsible for investigating suspected violations of and enforcing consumer protection laws. In essence, OCP alleges that Defendants violated the consumer protection laws of Hawai‘i and the federal government by, inter alia, taking payment from consumers for services not yet performed, failing to use written contracts with consumers, and operating a company that was not registered to do business in Hawai‘i. For relief, OCP seeks a declaratory judgment regarding the foregoing alleged violations, permanent injunctive relief preventing Defendants from performing certain services in Hawai‘i, an accounting of all funds Defendants have received from their alleged activities, the assessment of various allegedly “non-compensatory civil fines and penalties, ” a declaratory judgment rendering all of Defendants' contracts void and unenforceable, the disgorgement of any money or assets Defendants obtained due to any wrongful acts, and attorneys' fees and costs.

         One of the defendants, Stone, proceeding pro se, has filed an Answer to the Complaint and Counterclaims. Dkt. No. 16.[1] That filing, in particular the counterclaims, is the subject of the instant motion. In the motion, OCP seeks dismissal of all of the counterclaims for various reasons, pursuant to Federal Rules of Civil Procedure 12(b)(1) and (6). Among other things, OCP argues that it has sovereign immunity from Stone's claims, Stone's claims are insufficiently pled, certain claims cannot be pled against OCP, Stone's claims are time-barred, and Stone does not have standing to assert many of his claims.

         As for the counterclaims themselves, Stone makes a range of allegations-on behalf of himself and other individuals who are not named as parties-against OCP and Hawai‘i's Office of Disciplinary Counsel (ODC), which is also not named as a party. Counterclaims One through Seven all allege violations of Sections 1983 and/or 1985 of Title 42. Counterclaim One concerns an alleged violation of due process related to OCP and ODC depriving Stone, his “former clients, ” and an attorney, Gary Dubin, of fair trials. Counterclaim Two concerns OCP and ODC allegedly interrogating and threatening Chester Abing, a “former client” of Stone's. Counterclaim Three concerns OCP and ODC allegedly denying Stone's “former clients” their right to counsel. Counterclaim Four concerns OCP and ODC denying Stone's “former clients” equal protection by “rigging the odds in court” between the clients and so-called “pretender-lenders.” Counterclaim Five concerns an alleged conspiracy that appears to involve “lawyers who control” the OCP and ODC depriving Stone's “former clients” of equal protection. Counterclaim Six concerns allegedly depriving Stone's “clients” the right to access the courts. Counterclaim Seven concerns an alleged failure to prevent violations of Stone's “clients'” constitutional rights.

         Counterclaims Eight through Twelve state that they are premised upon state law. Counterclaim Eight concerns allegedly subjecting Stone, Dubin, and other unknown lawyers to judicial proceedings with insufficient probable cause. Counterclaim Nine concerns an alleged conspiracy “to accomplish an unlawful purpose by unlawful means.” Counterclaim Ten concerns alleged intentional “acts and conduce [sic]” that caused Stone, his “former clients, ” and Dubin severe emotional distress. Counterclaim Eleven alleges that the State of Hawai‘i is liable for “all torts committed by its agents.” Finally, Counterclaim Twelve appears to assert that OCP is required to pay “any tort judgment for compensatory damages for which employees are liable within the scope of their employment activities.”

         Stone has filed an opposition to the motion, Dkt. No. 38, and OCP has filed a reply, Dkt. No. 42. On September 26, 2019, the Court vacated the hearing on the motion, Dkt. No. 45, and this Order now follows.

         STANDARD OF REVIEW

         I. Motion to Dismiss Under Rule 12(b)(1)

         Pursuant to Rule 12(b)(1), a party may move for dismissal of a claim or claims due to a lack of subject matter jurisdiction. When deciding such a motion, a district court may consider extra-pleading material submitted by the parties, such as affidavits, and, if necessary, resolve factual disputes. Assoc. of Am. Med. Colleges v. United States, 217 F.3d 770, 778 (9th Cir. 2000). The burden of establishing subject matter jurisdiction “‘rests upon the party asserting jurisdiction[, ]'” id. (quoting Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994)), which, with respect to the counterclaims, is Stone.

         II. Motion to Dismiss Under Rule 12(b)(6)

         Rule 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 “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). 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.'” 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). In addition, “the 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 allegations that only permit the court to infer “the mere possibility of misconduct” do not show that the pleader is entitled to relief as required by Rule 8(a)(2). Id. at 679.

         A court may consider certain documents attached to a complaint, as well as documents incorporated by reference in the complaint or matters of judicial notice, without converting a Rule 12(b)(6) motion to dismiss into a motion for summary judgment. United States v. Ritchie, 342 F.3d 903, 908-09 (9th Cir. 2003).

         III. Pro Se Status

         Because Stone is proceeding without legal representation, the Court liberally construes his counterclaims. See Eldridge v. Block, 832 F.2d 1132, 1137 (9th Cir. 1987). With that in mind, “[u]nless it is absolutely clear that no amendment can cure the defect . . . a pro se litigant is entitled to notice of the … deficiencies and an opportunity to amend prior to dismissal of the action.” Lucas v. Dep't of Corr., 66 F.3d 245, 248 (9th Cir. 1995). However, the Court cannot act as counsel for a pro se litigant or supply the essential elements of a claim. Pliler v. Ford, 542 U.S. 225, 231 (2004); Ivey v. Bd. of Regents of Univ. of Alaska, 673 F.2d 266, 268 (9th Cir. 1982).

         DISCUSSION

         In its motion, Dkt. No. 30-1, OCP seeks dismissal of the counterclaims on asserted subject matter jurisdiction and pleading grounds. Because subject matter jurisdiction goes to this Court's power to adjudicate a claim, whether deficiently pled or not, the Court addresses that argument first. Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94-95 (1998).

         I. Rule 12(b)(1)

         OCP argues that subject matter jurisdiction is lacking over Stone's counterclaims on two grounds. First, the counterclaims are barred by the Eleventh Amendment and by sovereign immunity.[2] Second, Stone does not have standing to assert the counterclaims on behalf of ...


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