Pfeister v. Action Property Management, Inc.

Background

Joanna L. Pfeister owns a condominium in the Gramercy Towers building in San Francisco and is a member of the Gramercy Towers Condominium Association’s board of directors. Action Property Management, Inc. manages the building and keeps the Association’s records. Pfeister alleged that the lawsuit arose from a contract between the Association and Action Property Management that she helped negotiate as chair of the Association’s management company selection committee. She alleged that she was an intended third-party beneficiary of that contract.

Pfeister asserted four claims: breach of contract based partly on 41 U.S.C. § 6503 and the failure to let her inspect records; common counts concerning mold damage and an alleged assault by an employee; misappropriation of Association funds under California Civil Code § 5502; and conversion based on an employee’s failure to provide her with a letter. She sought, among other relief, specific performance, damages, punitive damages, and attorney’s fees.

Before filing in federal court, Pfeister had filed a similar lawsuit in San Francisco Superior Court. After Action Property Management successfully challenged the original and amended complaints, the state court gave Pfeister final permission to amend. She instead dismissed that case and filed this federal lawsuit.

Subject-Matter Jurisdiction

Action Property Management moved to dismiss under Federal Rule of Civil Procedure 12(b)(1), which permits dismissal for lack of subject-matter jurisdiction. The company argued that diversity jurisdiction was absent. Diversity jurisdiction generally requires the parties to be citizens of different states and the amount in controversy to exceed $75,000.

The parties disputed whether Pfeister was domiciled in California or Nevada. The opinion states that Action Property Management was a California citizen because it was incorporated in California. Action Property Management relied on addresses and other information in Pfeister’s state-court filings that connected her to California, including the condominium address, a California driver’s license, and prior California addresses.

Pfeister submitted a declaration stating that she lived in Nevada, had never permanently lived in California, and used the condominium as an office when conducting business in California. She also stated that a Carmel, California address was for a vacation home she had sold and that the address on her California driver’s license was a Veterans’ Administration hospital where she had received medical treatment. She identified other Nevada ties, including Nevada voter registration, vehicle registration and insurance, and tax filings, but provided no documentary proof of those statements.

The court held that Pfeister had not met her burden of establishing that Nevada was her domicile. Because the domicile requirement was not established, the court did not reach the amount-in-controversy requirement. The court also noted that Pfeister did not assert federal-question jurisdiction. It concluded that citing 41 U.S.C. § 6503 did not create federal-question jurisdiction because that statute concerns damages recoverable by the federal government from a contractor and does not establish a private right of action.

Rule 12(b)(6) Analysis

The court also considered Action Property Management’s alternative motion under Rule 12(b)(6), which allows dismissal for failure to state a legally sufficient claim. The court concluded that each claim had either no legally cognizable theory or insufficient factual allegations.

For Claim One, the court held that Pfeister had not alleged facts connecting the contract to 41 U.S.C. § 6503, which concerns certain contracts made by a federal agency. She did not allege that the federal government was a party to the contract or that the contract involved the manufacture or furnishing of materials or equipment. The court also concluded that any California breach-of-contract theory was inadequately pleaded because Pfeister did not clearly identify the contract, its parties, or each party’s required performance. She also did not adequately allege that the legal correspondence she sought was a record the defendant had to make available for inspection.

For Claim Two, the court held that Pfeister’s common-count allegations were conclusory. She alleged that Action Property Management became indebted to her for money used to repair mold damage, but she did not explain how the defendant became indebted or allege facts showing that she had made a payment by mistake. The court also noted that Pfeister had not pleaded a separate intentional-tort claim in the complaint.

For Claim Three, Pfeister alleged that Action Property Management violated California Civil Code § 5502 by transferring Association funds to pay for a lawsuit against her. The court held that she had not pleaded a basis showing how a violation of that statute creates a private cause of action.

For Claim Four, the court held that Pfeister had not adequately alleged conversion. Conversion requires, among other things, ownership or a right to possess the property. Although Pfeister cited California Corporations Code § 8334, which gives a director a right to inspect and copy certain corporate records, she did not provide a legal basis for concluding that an inspection right created a possessory interest in the letter.

Disposition

Chief Judge Richard Seeborg granted the motion to dismiss. The order states that dismissal was supported both by the lack of subject-matter jurisdiction under Rule 12(b)(1) and by the failure to state a claim under Rule 12(b)(6). Because it was unclear whether the deficiencies could be corrected, the court granted the motion with leave to amend and gave Pfeister 21 days to file an amended complaint if she chose to do so. The opinion does not state that the dismissal was with or without prejudice.