Salvador v. Live At Home Care Connection, Inc.

Background

William G. Salvador, identified in the opinion as a citizen of Canada, sued Mylah G. Spears, Live At Home Care Connection, Inc. (LAHCC), Care Connection Transport, Inc. (CCT), and Doe defendants. He asserted a single claim labeled “alter ego liability” and invoked federal diversity jurisdiction. Salvador alleged that he was a creditor of LAHCC, that Spears represented the debt was her obligation to repay, and that Spears withdrew money from LAHCC and CCT to avoid repayment and render the businesses insolvent. He sought $200,000 in damages.

Spears owned 40 percent of LAHCC and 30 percent of CCT, according to the allegations summarized by the court. The complaint alleged total withdrawals of $66,000. Spears moved to dismiss under Federal Rules of Civil Procedure 12(b)(1), concerning subject-matter jurisdiction, and 12(b)(6), concerning failure to state a legally sufficient claim.

Subject-Matter Jurisdiction

Spears made a factual challenge to the alleged amount in controversy. In a declaration, she denied causing withdrawals of $8,000, $50,000, and $8,000 from LAHCC and CCT. Salvador responded in his own declaration that Spears withdrew $14,000 from LAHCC and $47,000 from CCT, and he asserted that the withdrawals were willful and fraudulent conversions supporting punitive damages above the jurisdictional amount.

The court held that the competing declarations raised material factual disputes directly connected to the underlying claim. Applying the standard used for summary judgment to this jurisdictional dispute, the court concluded that the facts had to be resolved by the factfinder. It therefore denied Spears’s motion to dismiss under Rule 12(b)(1).

Standing and Leave to Amend

Spears argued that Salvador had not alleged enough facts to show that he was a creditor or to explain why he could seek relief based on the alleged withdrawals. Salvador relied on his declaration, which described him as a creditor and also as a shareholder, director, and officer of LAHCC and CCT. He requested permission to amend the complaint to clarify the basis for his standing.

The court granted Salvador leave to amend. It found no evidence of bad faith, undue delay, or prejudice, noted that he had not previously amended, and concluded that the proposed amendments did not appear futile.

Failure to State a Claim

Spears argued that “alter ego” is not an independent claim but instead is a legal theory for imposing liability based on a separate substantive claim. Salvador did not dispute that point. He argued that the complaint contained enough facts to support conversion or fraud and requested leave to add claims for fraud, conversion, and other related causes of action.

The court concluded that the complaint failed to state a claim because Salvador did not identify, and the court could not find, a recognized standalone claim for alter ego liability. The court granted Spears’s motion to dismiss for failure to state a claim, with leave to amend.

Disposition

The order granted in part and denied in part Spears’s motion to dismiss. Specifically, the court denied the motion to dismiss for lack of subject-matter jurisdiction and granted the motion to dismiss for lack of standing and failure to state a claim, with leave to amend. The court ordered Salvador to file and serve an amended complaint no later than March 6, 2020.