Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_06-cv-01661/USCOURTS-azd-2_06-cv-01661-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441 Petition For Removal--Other Contract

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WO

NOT FOR PUBLICATION

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

SMDI Company,

Plaintiff,

vs.

Dynamic Details Incorporated, Arizona, et

al., 

Defendants.

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No. CV-06-1661-PHX-FJM

ORDER

I

In 2001, Dynamic Details Incorporated, Arizona ("DDI Arizona") assumed the

obligations as lessee of two commercial properties for which SMDI Company ("SMDI") is

the property manager. SMDI contends that DDI Arizona violated its lease and committed

various environmental harms. SMDI also contends that the owners of the properties

authorized it to enforce the terms of the lease. Accordingly, SMDI filed this action against

DDI Arizona seeking damages for breach of contract and an injunction requiring DDI

Arizona to disclose various documents related to the properties' environmental conditions.

SMDI also named as defendant Dynamic Details Incorporated ("DDI"), which it describes

as DDI Arizona's alter ego. Defendants contend that all claims against DDI should be

dismissed because SMDI cannot show that DDI is DDI Arizona's alter ego, and that all

claims against both DDI and DDI Arizona should be dismissed because SMDI lacks

standing. We have before us defendants' motion to dismiss (doc. 4), the response and the

Case 2:06-cv-01661-FJM Document 16 Filed 08/15/06 Page 1 of 4
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reply; plaintiff's alternative motion to convert the motion to dismiss to a motion for summary

judgment and to extend the time to respond (doc. 7), the response and the reply; and

defendants' motion to strike (doc. 9), the response and the reply.

II

We begin by clarifying the standard by which we consider a motion to dismiss

pursuant to Rule 12(b)(6), Fed. R. Civ. P. A complaint should only be dismissed if "it

appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which

would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 102 (1957).

We must accept all of plaintiff's material factual allegations as true, and draw all reasonable

inferences in plaintiff's favor. Anderson v. Clow (In re Stac Elecs. Sec. Litig.), 89 F.3d 1399,

1403 (9th Cir. 1996). And we may consider only facts alleged in the pleadings, documents

incorporated into the pleadings by reference, or matters upon which we may take judicial

notice. Lovelace v. Software Spectrum Inc., 78 F.3d 1015, 1017-18 (5th Cir. 1996).

Consideration of other matters requires us to convert the motion to dismiss to a motion for

summary judgment. Fed. R. Civ. P. 12(b). However, this device is of limited utility because,

unless the external materials are incontrovertible, we must give the parties a fair opportunity

to conduct discovery to flesh out their case.

III

"[W]hen one corporation so dominates and controls another as to make that other a

simple instrumentality or adjunct to it, the courts will look beyond the legal fiction of distinct

corporate existence, as the interests of justice require." Gatecliff v. Great Republic Life Ins.

Co., 170 Ariz. 34, 38, 821 P.2d 725, 729 (1991) (quotation omitted). Accordingly, for SMDI

to prevail on its claims against DDI, it must show a "unity of control" between DDI and DDI

Arizona, and that the "observance of the corporate form would sanction a fraud or promote

injustice." Taeger v. Catholic Family and Cmty. Servs., 196 Ariz. 285, 297, 995 P.2d 721,

733 (Ct. App. 1999) (quotation omitted). SMDI contends that DDI financed and operated

DDI Arizona's operations, that DDI's operations directly caused harm to SMDI, and therefore

DDI should be considered DDI Arizona's alter ego.

Case 2:06-cv-01661-FJM Document 16 Filed 08/15/06 Page 2 of 4
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Defendants contend that SMDI cannot show either of the requisite elements. First,

defendants present evidence to show that DDI and DDI Arizona function separately. This

evidence, which is external to the pleadings, is inadmissible at this stage. And to the extent

that any of the evidence is admissible, it is insufficient to show beyond doubt that SMDI

cannot prevail against DDI on an alter ego theory. Next, defendants contend that SMDI

"failed to present any admissible evidence to prove that DDI Arizona is an instrumentality

of DDI." Reply in Support of Motion to Dismiss at 5. SMDI need not present evidence at

this stage; we accept as true the factual allegations in its complaint. Finally, defendants

assert that SMDI does not allege that DDI Arizona was established for any fraudulent, unjust

or inequitable reasons. SMDI need not do so to prevail. It need only assert facts that would

show that "observance of the corporate form would sanction a fraud or promote injustice,"

and it alleges that DDI acted to SMDI's detriment and therefore it should be held responsible.

Accordingly, we deny defendants' motion to dismiss the claims against DDI.

IV

Defendants also contend that because SMDI is the property manager and not the

landlord or owner of the disputed properties, it lacks standing to bring these claims. In

response, SMDI contends that the proper inquiry is not one of standing, but one of the real

party in interest pursuant to Rule 17(a), Fed. R. Civ. P. Although SMDI contends that it is

authorized by the owners of the property to bring this action, it does not contend that it has

standing or that it is the real party in interest. Instead, it seeks a reasonable period of time

to amend the complaint to name the owners as plaintiffs. SMDI's request is reasonable at this

early stage of the litigation.

V

Accordingly, IT IS ORDERED DENYING defendants' motion to dismiss (doc. 4).

IT IS FURTHER ORDERED DENYING as moot plaintiff's alternative motion to

convert defendants' motion to dismiss to a motion for summary judgment and for an

extension of time for response (doc. 7).

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IT IS FURTHER ORDERED DENYING as moot defendants' motion to strike the

affidavit of Timothy H. Barnes, which relates to plaintiff's moot alternative motion (doc. 9).

IT IS FURTHER ORDERED that SMDI shall, within 15 days of the docketing of

this order, file an amended complaint substituting the owners of the disputed property as

plaintiffs. Failure to do so will result in dismissal of this case.

DATED this 14th day of August, 2006.

Case 2:06-cv-01661-FJM Document 16 Filed 08/15/06 Page 4 of 4