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Wells Fargo Bank N.A. v. Breakwater Equity Partners LLC

United States District Court, Ninth Circuit

December 30, 2013

Wells Fargo Bank NA, Plaintiff,
v.
Breakwater Equity Partners LLC, et al., Defendants.

ORDER

DAVID G. CAMPBELL, District Judge.

Cross-Defendant Breakwater Equity Partners, LLC has filed a motion to dismiss (Doc. 125) Cross-Claimants Richard Gee and Maxwell Drever's cross-claim (Doc. 104). Cross-Defendant also moves to realign Cross-Claimants. Doc. 125. For the reasons set forth below, the Court will deny each motion.[1]

Since filing this motion, Cross-Defendant and Cross-Claimants have stipulated to dismiss the cross-claim without prejudice (Doc.135) and the Court has granted the stipulation (Doc. 136). The Court will deny the motion to dismiss as moot.

Cross-Defendant argues that Cross-Claimants have aligned themselves with Plaintiff in opposition to all remaining Defendants. Doc. 125 at 4. Accordingly, Cross-Defendant asks the Court to "look beyond the pleadings, and [realign] the parties according to their sides in the dispute." City of Indianapolis v. Chase Nat'l Bank of N.Y., 314 U.S. 63, 69 (1941) (internal quotes omitted). Realignment would defeat diversity jurisdiction in this case.

Courts are to realign parties "whose interests coincide respecting the primary matter in dispute.'" Prudential Real Estate Affiliates, Inc. v. PPR Realty, Inc., 204 F.3d 867, 873 (9th Cir. 2000) (quoting Cont'l Airlines, Inc. v. Goodyear Tire & Rubber Co., 819 F.2d 1519, 1523 (9th Cir. 1987). Where a named defendant would benefit if a plaintiff prevails, realignment may be appropriate. Prudential, 204 F.3d at 873. In this case, Plaintiff and Cross-Claimants are clearly adverse.

The primary matter in dispute is whether Defendants converted Plaintiff's money or otherwise breached the parties' contract. Cross-Claimants are the individuals who sponsored the investment by other named Defendants in the property at issue. Cross-Defendant argues that Cross-Claimants and Plaintiff both wish "to ignore all responsibility lender and sponsor had in concocting an unsustainable investment and blaming a third party for the outcome, " but the Court finds this characterization to be incomplete and unpersuasive. Doc. 125 at 5. Plaintiff seeks to recover converted funds. If Plaintiff succeeds, Cross-Claimants are not entitled to any recovery. To the contrary, Cross-Defendant's alleged conversion may trigger recourse against Cross-Claimants. Doc. 104, ΒΆ 198. Because Cross-Claimants could be exposed to personal liability if Plaintiff succeeds, the Court cannot accept Cross-Defendant's assertion that the interests of Cross-Claimants and Plaintiff are aligned.

Cross-Defendant argues that Cross-Claimants' tactics pursued during the course of this litigation reveal an alignment with Plaintiff's interest. Doc. 125 at 4. For example, Cross-Defendant finds this alignment in Cross-Claimants' refusal to file a motion to dismiss Plaintiff's complaint. Id. But the Court may not look to "facts that arose after the complaint was filed in federal court, " such as litigation tactics, in determining whether to realign the parties. See In re Digimore Corp. v. Derivative Litig., 549 F.3d 1223, 1236 (9th Cir. 2008) (finding that the district court erred in relying on evidence of defendant's cooperation with plaintiff three weeks after the suit was filed).

IT IS ORDERED:

1. Cross-Defendant's motion to dismiss (Doc. 125) is denied as moot.
2. Cross-Defendant's motion to realign (Doc. 125) is denied.
3. Cross-Defendant's motion for fees and costs (Doc. 125) is denied.

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