Free Order on Motion to Dismiss Case - District Court of Arizona - Arizona

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IN THE UNITED S TATES DIS TRICT COURT FOR THE DIS TRICT OF ARIZONA Century 21 Real Estate Corporation, ) ) ) ) ) ) ) ) ) ) ) ) ) ) No. CV-03-2353-PHX-DGC

9 Plaintiff/Counterdefendant, 10 vs. 11 12 13 14 Defendants/Counterclaimants. 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Daryush B. M otlagh and Jennifer M otlagh, husband and wife; and Integrity Assurance, Inc., an Arizona corporation,

ORDER

Pending before the Court are Plaintiff's renewed motion to dismiss counterclaims and motion for summary judgment on Plaintiff's breach of contract and unjust enrichment claims. D ocs . ##50-51. Also pending is Defendants' motion to reinstate counterclaims.

Doc. #59. For the reasons set forth below, the Court will grant Plaintiff's mot ion t o dismiss in part, deny its motion for summary judgment without prejudice, and deny D efendants' motion to reinstate counterclaims as moot. The Court also will s et a s t atus conference in this matter for December 14, 2005, at 4:00 p.m.1

The Court will deny the request for oral argument because the parties have submitted memoranda thoroughly discussing the law and evidence and the Court concludes that oral argument will not aid its decisional process . See Mahon v. Credit Bur. of Placer County, Inc., 171 F.3d 1197, 1200 (9th Cir. 1999); Partridge v. Reich, 141 F.3d 920, 926 (9t h Cir. 1998); Lake at Las Vegas Investors Group, Inc. v. Pacific. Dev. Malibu Corp., 933 F.2d 724, 729 (9th Cir. 1991), cert denied, 503 U.S. 920 (1992). Case 2:03-cv-02353-DGC Document 63 Filed 11/28/2005 Page 1 of 4

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Discussion The Renewed Motion to Dismiss and Motion to Reinstate Counterclaims.

In a June 2, 2004 order, the Court denied Plaintiff's original motion to dismis s because it was unclear whet her t he counterclaims belonged to Defendants or the

bankruptcy estate. D oc. #28 at 6-7. On October 26, 2004, the Bankruptcy Court held that the counterclaims belonged to the estate and t hat the proper party to pursue them was the trustee, not Defendants. In re Motlagh, 2:01-bk-17367-RJH (Bankr. D. Ariz. Oct. 26, 2004 Order). In an A p ril 18, 2005 discovery order, this Court acknowledged that Defendants

could not assert the counterclaims in light of the Bankruptcy Court's determination ( Doc. #47 at 1-2), but the Court did not formally dismiss the counterclaims. Id. Plaintiff renew ed it s motion to dismiss on M ay 13, 2005, arguing that Defendants do not have standing t o p urs ue the counterclaims in light of the Bankruptcy Court's order. Doc. #50 at 1-2. Defendants have moved to "reinstate" the counterclaims on the ground

that Daryush M otlagh purchased the claims at a bankruptcy estate auction on A ugus t 30, 2005. Doc. #59 at 2, Ex. 2. Plaintiff admits that Daryush M otlagh purchased the

counterclaims from the bankruptcy estate. Doc. #61 at 1. Under Arizona law, the counterclaims constitute the community property of D ary us h and Jennifer M otlagh. See A.R.S. §§ 25-211 ("All property acquired by either husband or wife during the marriage is the community propert y of the husband and wife[.]"); 25-214(C) ("Either spouse separately may acquire . . . community property[.]"); In re Estate of Stephens, 574 P.2d 67, 73 n. 4 (Ariz. Ct. App. 1978) (stating that one-half of a husband's income belonged to his wife "[s]ince Arizona is a communit y property state"); see also Docs. ##1 ¶¶ 2-4, 13 at 2. The Court will accordingly deny Plaintiff's motion t o dismiss with respect to Defendants Daryush and Jennifer M otlagh becaus e t hey now own and have s tanding to pursue the counterclaims. The Court will grant the motion with

respect to D efendant Integrity Assurance because it did not purchase the counterclaims and thus does not have standing to pursue them. The Court need not "reinstate" the

counterclaims because they have never been dismissed; they may now be pursued by the
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M otlaghs. B. Plaintiff's Motion for S ummary Judgment.

Plaintiff filed the present motion for summary judgment on M ay 13, 2005. D oc. #51. Plaintiff argues that Daryush M otlagh breached the franchise agreement by failing to make required payments. Id. at 5. Plaint iff cont ends that Defendants cannot argue that

Plaintiff's alleged breach of the franchise agreement excused M otlagh's breach because Defendants do not own the counterclaims and, as a matter of law, a franchisee may not refuse to make payments under a franchise agreement while continuing to accept the benefits of t he agreement. Id. at 5-6 (citing Dunkin' Donuts, Inc. v. Donuts, Inc., No. 99CV-1141, 2000 WL 1808517 (N.D. Ill. Dec. 6, 2000)). The Court will deny the motion for summary judgment without prejudice. As discussed above, the counterclaims now belong to Daryush and J ennifer M otlagh, undercutting a portion of Plaintiff's argument. M oreover, the Court concludes that the

holding in Dunkin' Donuts does not at this stage entitle P laint iff to summary judgment on its breach of cont ract claim because in that case it was undisputed that the franchise agreement was validly terminated by the franchisor based on the franchisee's numerous violations of health and s afet y s tandards. Dunkin' Donuts, 2000 WL 1808517 at *9. In this case, Defendant s allege that Plaintiff improperly sought to terminate the franchise

agreement w hen the automatic bankruptcy stay was in effect and thereafter repudiated the agreement and refused to acknowledge Daryush M ot lagh's franchise. Docs. ##1 ¶ 41, 13

at 3-10, 54 at 2-3, 8. Furthermore, t he district court in Dunkin' Donuts did not apply New Jersey law, which governs the franchise agreement in t his cas e. See Doc. #1 Ex. A ¶ 25(A). The factual issues regarding Plaintiff's breach of contract claim also preclude summary judgment on its unjust enrichment claim against Defendant Integrity Assurance. The Court will deny Plaintiff's motion without p rejudice because discovery to be conducted on the counterclaims may establish facts that can later be asserted in s up p ort of summary judgment. The Court will permit discovery on the counterclaims and the filing of dispositive motions on all claims at issue.
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/// The parties shall be prepared to address new discovery and dis p os it ive motion deadlines at a status conference to be held on December 14, 2005. The parties shall file a joint proposal regarding such deadlines by December 9, 2005. IT IS ORDERED: 1. Plaint iff's renewed motion to dismiss counterclaims (Doc. #50) is granted in

part and denied in part as set forth in this order. 2. prejudice. 3. 4. 5. Defendants' motion to reinstat e counterclaims (Doc. #59) is denied as moot. A status conference is set for December 14, 2005, at 4:00 p.m. The parties shall file a joint proposal regarding new dis covery and dispositive Plaintiff's motion for summary judgment (Doc. #51) is denied without

motion deadlines by December 9, 2005. DATED this 28th day of November, 2005.

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