Court Opinion

ID: 4110605
Source: CourtListenerOpinion
Date Created: 2016-12-23 16:01:45.046841+00
Date Added: 2024-06-11T07:46:09.987799
License: Public Domain

UNITED STATES DISTRICT COURT
                            FOR THE DISTRICT OF COLUMBIA

_________________________________________
                                          )
Stephen Kelleher,                         )
                                          )
      Plaintiff,                          )
                                          )
              v.                          )                    Case No. 1:16-cv-02092 (APM)
                                          )
Dream Catcher, L.L.C., et al.,            )
                                          )
      Defendants.                         )
_________________________________________ )

                          MEMORANDUM OPINION AND ORDER

       Plaintiff Stephen Kelleher entered into a contract with Defendant Dream Catcher, L.L.C.

to renovate his home. Dream Catcher’s owners are Defendants Cesar De Armas and Heidi

Schultz. When the renovation went awry, Plaintiff brought this action against Dream Catcher and

its two owners, advancing various contract, quasi-contract, and tort claims, as well as two putative

statutory claims under District of Columbia law. See Notice of Removal, ECF No. 1, Compl.,

ECF No. 1-1 [hereinafter Compl.].

       Before the court is a Motion to Dismiss filed by De Armas and Schultz. Indiv. Defs.’ Mot.

to Dismiss, ECF No. 3 [hereinafter Defs.’ Mot.]. They primarily argue that the Complaint must

be dismissed as to them because it fails to allege sufficient facts that make them individually liable

for Dream Catcher’s acts. Put another way, Defendants argue that Plaintiff fails to allege facts

sufficient to support either an alter ego or veil piercing theory of individual liability. Defs.’ Mot.,

Defs.’ Mem., ECF No. 3-1, at 3–6. Notably, Plaintiff concedes that all claims against De Armas

and Schultz are wholly predicated on those two theories of individual liability. See Pl.’s Opp’n,

ECF No. 7, at 3.
       The court agrees with De Armas and Schultz that the Complaint lacks sufficient factual

allegations to support an alter ego or veil piercing theory of liability. “Although a plaintiff need

not ‘show at the pleadings stage . . . [that which] he needs to show to prevail at trial,’ the plaintiff

must still allege sufficient facts regarding an alter ego relationship to ‘satisfy Rule 8(a) and

[Ashcroft v. Iqbal, 556 U.S. 662 (2009)].” Motir Servs., Inc. v. Ekwuno, No. 15-1180, 2016 WL

3248190, at *8 (D.D.C. June 20, 2016) (alteration in original). Our Court of Appeals has recently

emphasized that “[a] corporation is ‘viewed as a distinct entity, even when it is wholly owned by

a single individual,’” and that “the law takes seriously the formal line between a corporation and

a natural person, even when the corporation is, in effect, a one-person firm.”              Nat’l Sec.

Counselors v. CIA, 811 F.3d 22, 31 (D.C. Cir. 2016) (quoting Quinn v. Butz, 510 F.2d 743, 757

(D.C. Cir. 1975) (footnote omitted)). And the Supreme Court has observed that “[o]ne-person

corporations are authorized by law and should not lightly be labeled a sham.” Nelson v. Adams

USA, Inc., 529 U.S. 460, 471 (2000).

       Here, Plaintiff alleges only one fact to support his alter ego or veil piercing theory: Dream

Catcher, De Armas, and Schultz shared the same address—1408 Varnum Street, N.W. Compl.

¶¶ 2–4. Although shared office space is a relevant factor for a court to consider when making an

alter ego determination, see Labadie Coal Co. v. Black, 672 F.2d 92, 99 (D.C. Cir. 1982); Camacho

v. 1440 R.I. Ave. Corp., 620 A.2d 242, 249 n.22 (D.C. 1993), it is not at all unusual for a closely

held entity to share a common address with its principles, as Plaintiff so conceded during a status

hearing in this matter. Thus, merely sharing a common address, without more, does not “nudge”

Plaintiff’s alter ego theory of liability “across the line from conceivable to plausible.” Bell Atl.

Corp. v. Twombly, 550 U.S. 544, 570 (2007).

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       Plaintiff, in his Opposition, attempts to bolster his claim by pointing to additional

allegations in his Complaint to support individual liability for De Armas and Schultz. See Pl.’s

Opp’n at 6–8. For instance, he alleges—in each instance, “[u]pon information and belief”—that

“there is a unity of ownership and interest between [D]e Armas and Schultz . . . and Dream

Catcher”; that “Dream Catcher is and at all relevant times has been undercapitalized”; that “there

has been extensive comingling and intermingling of assets between Dream Catcher and the

individual defendants”; that “Dream Catcher has failed to observe corporate formalities”; and that

“the individual defendants have utilized the company form of Dream Catcher to perpetrate

wrongful and fraudulent conduct upon Plaintiff in connection with the Project.” Compl. ¶¶ 17–

21. But these allegations are no more than “[t]hreadbare recitals,” of the factors courts must

consider in deciding whether the corporation is the alter ego of its shareholders, see Estate of

Raleigh v. Mitchell, 947 A.2d 464, 470–71 (D.C. Cir. 2008) (citing factors); Lawlor v. District of

Columbia, 758 A.2d 964, 975 (D.C. 2000) (same), “supported by mere conclusory statements,”

Iqbal, 556 U.S. at 678. Such allegations are not entitled to a presumption of truth and therefore

do not suffice to establish a plausible claim of alter ego liability. See id.

       Plaintiff asks the court to follow Regan v. Spicer HB, LLC, 134 F. Supp. 3d 21 (D.D.C.

2015), a case in which the district court permitted the plaintiff to seek discovery in support of his

similar claim of alter ego liability. Regan, however, is distinguishable from this case. There, the

court allowed discovery because “Plaintiff ha[d] sufficiently identified a fraud or wrong that [the

individual defendant] ha[d] committed through the actions of [the entity defendant] . . . . [in that]

Plaintiff alleged several torts that [the individual defendants] ha[d] committed through the actions

of [the entity defendant].” Id. at 40. Here, by contrast, Plaintiff has not alleged a tort or wrong

that De Armas or Schultz committed through Dream Catcher that would justify discovery.

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Instead, Plaintiff’s fraud claim rests entirely on the same acts that form the basis of his breach of

contract claims, compare Compl. ¶ 54 (alleged fraudulent representations), with id. ¶¶ 26, 31–32,

42 (alleged breaching conduct), and for that reason, those acts do not constitute an actionable claim

of fraud, see Plesha v. Ferguson, 725 F. Supp. 2d 106, 113 (D.D.C. 2010) (“District of Columbia

law requires that the factual basis for a fraud claim be separate from any breach of contract claim

that may be asserted.”); Choharis v. State Farm Fire & Cas. Co., 961 A.2d 1080, 1089 (D.C. 2008)

(“[T]he tort must exist in its own right independent of the contract, and any duty upon which the

tort is based must flow from considerations other than the contractual relationship.”).

         In addition, Plaintiff has not sufficiently justified veil piercing by alleging that De Armas

and Schultz used Dream Catcher to commit a fraud or “wrong” by operating without a “[D.C.]

Home Improvement Contract’s License,” thereby purportedly violating the “[D.C.] Home

Improvement Contractor law.” Compl. ¶¶ 50–51. The Complaint does not cite any District

statute that required Dream Catcher to obtain such a “home improvement contractor’s license” to

renovate Plaintiff’s home. Compl. ¶ 51. 1 To the contrary, Defendants have cited a District code

provision that, as of April 20, 1999, “eliminated” “[h]ome [i]mprovement” “as [a] separate license

categor[y].” See Defs.’ Mot. at 8 (citing D.C. Code § 47-2851.03a(o)(1)(C)). They also have

cited municipal policy that permits general contractors, like Dream Catcher, to perform home

improvement work without obtaining a specific home improvement license. 2 Accordingly, the

1 The District does appear to have a municipal regulation that requires a person to be licensed as a home improvement
contractor or salesperson employed by a licensed contractor. See D.C. Mun. Regs. tit. 16, § 800.1. But that provision
does not, as Plaintiff seems to suggest, provide a private right of action for its violation.
2
  See D.C. Dep’t of Consumer and Regulatory Affairs, Get a General Contractor/Construction Manager License,
Special Instructions, http://dcra.dc.gov/service/get-general-contractorconstruction-manager-license (“If a General
Contractor performs work on existing residential properties, a Basic Business License for the Home Improvement
Contractor category is not required in addition to the Basic Business License for the General Contractor category.”)
(last visited December 22, 2016). The court can take judicial notice of a public agency’s policies and procedures.
See Pharm. Research & Mfrs. of Am. v. U.S. Dep’t of Health & Human Servs., 43 F. Supp. 3d 28, 34 (D.D.C. 2014)
(“Courts in this jurisdiction have frequently taken judicial notice of information posted on official public websites of
government agencies.”).
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court is unconvinced that Plaintiff has even identified, let alone sufficiently pleaded, any “wrong”

stemming from Dream Catcher’s alleged lack of a “home improvement contractor” license that

would give rise to a plausible theory of alter ego liability.

       For the foregoing reasons, the court grants De Armas and Schultz’s Motion to Dismiss and

dismisses the Complaint against them without prejudice. Plaintiff may amend the Complaint by

January 6, 2017, as set forth in the court’s Order dated December 16, 2016, ECF No. 10.

                                                       ______________________
Dated: December 23, 2016                               Amit P Mehta
                                                       United States District Judge

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