Nobles v. Kern

Background

Kathleen Nobles filed a lawsuit against Fred M. Kern and Plum Holdings, LLC, alleging one count of breach of contract. Kern asserted two counterclaims against Nobles: breach of a joint venture and unjust enrichment. Kern’s joint-venture claim was also a crossclaim against third-party defendant Brenton A. Hering.

Nobles moved under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a pleading does not state a legally sufficient claim. She also moved under Rule 12(f) to strike allegations from Kern and Plum Holdings’s pleading. The challenged allegations asserted that Kern and Hering were both citizens of Florida and that the court therefore lacked diversity jurisdiction.

Joint-Venture Counterclaim

The parties agreed that a joint venture under California law requires a shared interest in a common business, an agreement to share profits and losses, and a right of joint control. Kern alleged that he, Nobles, and Hering verbally created a joint venture around 2011 concerning two properties in Carmel-by-the-Sea, California. He alleged that they agreed to pool resources to buy and improve one property, transfer water credits, sell that property, and use the proceeds and additional investments to build a home on the other property. Kern alleged that he would hold a 51% interest and Nobles and Hering would share a 49% interest.

Kern alleged that the parties began carrying out the plan in 2012 and 2013, but that Nobles breached the joint venture around 2014 by refusing to communicate with Kern about improvements and refusing to contribute additional money. Kern’s pleading also alleged that, later in 2014, Hering asked Kern whether he would proceed without Nobles and that Kern agreed.

The court held that Kern had not plausibly alleged Nobles’s continued participation after Kern agreed to proceed without her. The court explained, however, that this did not necessarily defeat Kern’s theory that Nobles breached the venture before that agreement by withdrawing or refusing to contribute. Kern had not alleged that Nobles was barred from withdrawing at will or otherwise pleaded enough details about the venture’s terms to establish a breach. The court also found that other alleged breaches were undated or appeared to have occurred after Nobles was no longer part of the venture. The breach-of-joint-venture counterclaim was therefore dismissed as to Nobles with leave to amend.

Unjust-Enrichment Counterclaim

The court rejected Nobles’s argument that unjust enrichment is only a remedy and not an independent claim under California law. But it found that Kern had not alleged that Nobles was unjustly enriched at another person’s expense. Kern alleged only that Nobles would be unjustly enriched if her action to enforce a promissory-note agreement succeeded. He did not allege that Nobles had received a benefit whose retention would be unjust. The court dismissed the unjust-enrichment counterclaim as to Nobles with leave to amend.

Motion to Strike and Disposition

The court granted Nobles’s motion to strike the allegations asserting that the court lacked diversity jurisdiction because Kern and Hering were both citizens of Florida. It granted the motion to dismiss with leave to amend. Any amended counterclaims were due by March 30, 2020, and amendment was limited to the defects discussed in the order and Nobles’s motion. Kern could not add new parties or claims without the court’s prior express permission.

Judge Beth Labson Freeman signed the order on March 9, 2020.