Maciel Builders LLC. v. US Framing International LLC.

Background

Maciel Builders LLC brought claims arising from carpentry work on the Ohlone Block B construction project in San Jose, California. It alleged that it was not paid for work it performed and asserted breach of contract, related state-law claims, and a federal civil Racketeer Influenced and Corrupt Organizations Act claim against US Framing International, LLC; US Framing West, Inc.; Thomas G. English; Nicholas Rivera; Ivan Villalva; Joe Garcia; Matthew Phillips; and Ryan Therrien.

US Framing International, US Framing West, English, Rivera, and Villalva answered the complaint. US Framing West also filed a counterclaim against Maciel Builders and a third-party complaint against Jose Maciel. The third-party complaint asserted two claims based on the theory that Jose Maciel was Maciel Builders’ alter ego: a claim under California Business and Professions Code section 7031(b), seeking repayment of money allegedly paid for work performed without a valid contractor’s license, and a breach-of-contract claim.

Maciel Builders later filed for Chapter 7 bankruptcy. The court stayed the case and explained that Maciel Builders’ claims were property of the bankruptcy estate and could be pursued only by the Chapter 7 trustee. The court also stated that US Framing West’s counterclaim was subject to the automatic bankruptcy stay.

Jose Maciel’s Motion

Jose Maciel filed a motion to dismiss the third-party complaint under Federal Rules of Civil Procedure 12(b)(6), 12(b)(1), and 12(b)(2). Before that motion was filed, US Framing West had submitted a notice voluntarily dismissing its third-party complaint without prejudice. Jose Maciel challenged that dismissal and argued, among other things, that a settlement involving the Chapter 7 trustee required the third-party complaint to be dismissed with prejudice and that he should receive attorney’s fees.

The court held that US Framing West’s voluntary dismissal complied with Federal Rule of Civil Procedure 41. That rule allows dismissal without a court order before the opposing party serves an answer or a motion for summary judgment, and the rule applies to third-party claims. Jose Maciel had not served an answer or motion for summary judgment. The court also explained that a motion to dismiss is not a responsive pleading for this purpose.

The court therefore concluded that the voluntary dismissal terminated the third-party complaint on July 9, 2020. Because the third-party complaint had already ended, the court did not decide the grounds raised in Jose Maciel’s motion to dismiss. It terminated the motion as moot and vacated the October 22, 2020 hearing.

Remaining Claims and Order

The court noted that the settlement approved by the bankruptcy court appeared to resolve Maciel Builders’ remaining claims, but the status report and settlement-approval order did not specifically refer to Maciel Builders’ claims against Nicholas Rivera and Ivan Villalva or to US Framing West’s counterclaim against Maciel Builders.

The court held that it could not dismiss Maciel Builders’ claims without the Chapter 7 trustee’s consent because those claims belonged to the bankruptcy estate. It also could not dismiss US Framing West’s counterclaim while the automatic bankruptcy stay applied without approval from the bankruptcy court.

Judge Beth Labson Freeman ordered the defendants to file, by August 26, 2020, a stipulation and proposed order dismissing the remaining claims and counterclaim, signed by the Chapter 7 trustee and the defendants or their representatives. The filing had to state that the trustee approved dismissal of Maciel Builders’ claims against all defendants, including Rivera and Villalva, and that the bankruptcy court approved dismissal of US Framing West’s counterclaim. Alternatively, the defendants had to file a further status report by that date. The order terminated ECF 91.