Dayan v. Sutton

Background

The court held oral argument on the defendants’ motions to dismiss. The opinion summarizes the reasons given on the record. The plaintiffs asserted six counts, including a claim for breach of contract. The opinion also refers to claims involving alleged transfers of the plaintiffs’ money, fiduciary duties, conspiracy, and alter-ego theories.

Rulings on the Pleading

The court granted the motions to dismiss Count I, the breach-of-contract claim. The court held that the plaintiffs had not adequately alleged, in specific rather than conclusory terms, the essential terms of the alleged contract and the provisions that were supposedly breached. If the plaintiffs repleaded, they had to identify the parties to the contract, when and how it was formed, whether it was oral or written, its terms, and—if no single document embodied it—the documents or acts that formed the contract. They also had to provide more detail about when and how they requested the return of their funds and which defendants received those requests.

The court also granted the motions to dismiss Counts II through VI. It required the plaintiffs to state that those counts were pleaded in the alternative to Count I. For Count II, involving breach of fiduciary duty, the plaintiffs had to identify the specific defendants to whom money was transferred and explain how the transfers created fiduciary obligations. For Counts III through VI, the plaintiffs had to identify which defendants received the plaintiffs’ money and explain how those actions supported each claim. If the plaintiffs relied on conspiracy or alter-ego theories, they had to specifically allege how the defendants conspired or which defendants were alter egos of one another and why.

Issue Preclusion

The plaintiffs argued that issue preclusion—a rule that can prevent a party from relitigating an issue already decided—barred the defendants from seeking dismissal. The court rejected that argument based on the pleading then before it. The earlier state-court decision involved different plaintiffs, only some of the same defendants, and different operative facts. The court therefore found no basis to apply issue preclusion.

Statute of Limitations

The court declined to decide the defendants’ statute-of-limitations arguments. It stated that, if the plaintiffs alleged that the defendants concealed the wrongdoing, the limitations period likely would not begin until a reasonable plaintiff would have become aware of the claims. The court noted that the plaintiffs alleged they did not learn of any wrongdoing until February 2018 and said that allegation would likely be sufficient to survive a motion to dismiss on limitations grounds, while also requiring more detail about their requests for the return of funds.

Service on Morris Sutton

The court denied Morris Sutton’s motion to dismiss for insufficient service of process. He argued that service was improperly made at his mother’s residence. The plaintiffs argued that service was made at his dwelling on a person of suitable age and discretion. Morris Sutton’s declaration stated that the address was his mother’s residence and that he did not pay its bills or use it for voting or his driver’s license, but it did not state where he actually lived. Because he had notice of the complaint and had not shown prejudice, the court declined to dismiss the claims on that ground.

Disposition

The court granted the defendants’ motions to dismiss and granted the plaintiffs leave to replead. It denied Morris Sutton’s motion to dismiss based on insufficient service of process. The plaintiffs were ordered to file an amended complaint by March 25, 2022. The defendants were directed to move or answer by April 15, 2022. The court terminated the open motions.