United States District Court, D. Maryland
CATHERINE C. BLAKE, District Judge.
Plaintiff Luis Rullan, a Spanish national, filed this action against Jill Goden and her father, Fred Greenberg, seeking damages for various claims arising from a failed business relationship Rullan alleges he was falsely induced to enter. Before the court are Rullan's motion for joinder of additional defendants, (ECF No. 36), Rullan's motion to file an amended complaint, (ECF No. 39), and the defendants' motion to dismiss and motion to strike, (ECF No. 41). The issues in this case have been fully briefed, and no hearing is necessary. See Local R. 105.6. For the reasons stated below, the court will grant the motion to join Timber Ridge Incorporated, Youth World, Ltd., and Youth World International, Ltd., deny the motion to join Timber Ridge Camp, deny the motion to strike, grant the motion to amend, and grant in part and deny in part the motion to dismiss.
Timber Ridge Camp ("the Camp") is a summer camp in High View, West Virginia. (Am. Compl., ECF No. 39-1, ¶ 11.) The Camp is owned by Timber Ridge Incorporated ("TRI"), ( id. ¶ 12), and administered by a separate corporation called Youth World, Ltd. ("YWL"), ( id. ¶ 13). Rullan began attending the Camp in 1990 at the age of six, and continued attending for the next ten years. ( Id. ¶ 18.) Rullan developed a close relationship with the family that managed the Camp, including Fred Greenberg and his daughter Jill Goden. ( Id. ¶¶ 16, 19.) Greenberg and Goden each owned 50 percent of TRI and YWL. ( Id. ¶ 16.)
In November 2010, Rullan, Goden, and Greenberg spoke by telephone about the possibility of Rullan becoming Goden's partner in managing the Camp. ( Id. ¶ 21.) Rullan discussed the Camp's finances with Goden and Greenberg by telephone and email, and Goden and Greenberg significantly understated both the acreage of the Camp and the Camp's debt, and inflated revenue per camper. ( Id. ¶ 23.) Goden and Greenberg also withheld information concerning "the corporate structure and ownership of the Camp, " expenses and salaries, cash shortfalls, the full extent and nature of the Camp's debts, and the Camp's use of short-term bridge loans. ( Id. ¶ 24). They also withheld a January 2010 appraisal "which would have revealed the true size of the Camp and its value in light of its actual debt." ( Id. ¶ 25.) According to Rullan, the purpose of this alleged deception was to induce Rullan to leave his job as a consultant in Spain, contribute capital to the Camp, and use his family's social contacts to recruit European campers. ( Id. ¶ 38.)
In early December 2010, Rullan traveled to St. Andrews, Florida, to meet with Goden and Greenberg, present his management plan, and discuss a business relationship. ( Id. ¶¶ 22, 32.) Rullan alleges that his presentation was based on the false information he had received from Goden and Greenberg, who did not correct him during the presentation. ( Id. ¶ 35.) Following the presentation, Goden and Greenberg entered into an oral employment agreement ("the Employment Agreement") with Rullan, under which Rullan would be paid "a $72, 000 annual salary to work at the Camp full-time" and would share management duties with Goden. ( Id. ¶ 39.) "Rullan agreed to start full-time with Goden in January, 2011 by... recruiting campers in Europe, " before he came to the Camp that summer. ( Id. ¶ 40.) Rullan's salary was to be paid in monthly installments, with the size of each installment varying based on the season. ( Id. ¶ 41.) Rullan and Goden would split the cost of establishing a new company, Youth World International, Ltd. ("YWI"), to help Rullan and his fiancee obtain United States visas to work at the Camp. ( Id. ¶¶ 14, 41-42.) Rullan memorialized "much of the discussion and terms" of the Employment Agreement in a writing titled "Minutes meeting December 7, 2010 - St. Andrews, " which he emailed to Goden and Greenberg. ( Id. ¶¶ 42-43.) Rullan alleges he would not have agreed to the Employment Agreement's terms had he known the Camp's true financial state and size, as well as Goden's intention to manage without Rullan's involvement. ( Id. ¶ 44.)
Over the following months, Goden began to refer to Rullan as her partner. ( Id. ¶ 45.) Goden and Rullan verbally agreed that Rullan would assume Greenberg's share of the Camp's ownership, for which Rullan would pay ten annual installments of $50, 000, and they decided to put their agreement in writing that summer. ( Id. ¶¶ 46-47.) Rullan and Goden then formed YWI, with Rullan contributing $55, 000 for its capitalization and Goden contributing nothing. ( Id. ¶ 51.) Nevertheless, corporate documents described Goden and Rullan as splitting the cost, and they became co-owners of the new entity. ( Id. ) Within a week, Goden told Rullan she needed to "borrow" the $55, 000 capitalization to pay the Camp's bills, but that she would quickly reimburse the YWI account. ( Id. ¶ 52.) Rullan agreed. ( Id. )
When Rullan arrived at the Camp in May 2011, he "started to learn" about the Camp's true financial situation, learned that the Camp consisted of 70 acres rather than several hundred, and learned of the existence of TRI. ( Id. ¶ 54.) On June 4, 2011, at Goden's house at the Camp, Rullan, Goden, and Greenberg met to discuss Rullan's purchase of Greenberg's full equity stake in the Camp. ( Id. ¶ 55.) Neither Goden nor Greenberg disclosed to Rullan that Greenberg had acquired substantial debt in his capacity as president of TRI (and, in fact, had defaulted on that debt), or that several disputes existed that could give rise to litigation involving the Camp. ( Id. ¶¶ 56-58.)
On August 8, 2011, Goden met with Rullan at the Camp's office and asked him, as her "full partner, " to lend an additional $50, 000 to the Camp, telling him that he had co-equal financial responsibility for it. ( Id. ¶ 60.) Relying in part on Goden's and Greenberg's representations during the June meeting that Rullan was Goden's full partner, Rullan lent the balance of his life savings, $50, 000, to the Camp. ( Id. ¶ 62.)
On August 15 and 18, 2011, in the Camp's office, Rullan, Goden, and Greenberg again discussed Rullan's involvement in the Camp's operations. ( Id. ¶ 65.) Goden and Greenberg again told Rullan he and Goden were full partners and the Camp's co-owners, and that Goden and Rullan shared equal financial responsibility for the Camp. ( Id. ) On August 24, 2011, Greenberg, Goden, and Rullan each initialed every page of, and signed, an agreement titled "Partnership agreement August 24th, 2011 - Timber Ridge Camp, HV, WVA" ("the Partnership and Stock Agreement"). ( Id. ¶ 66.) Under this agreement, Greenberg conveyed his 50 percent share in the Camp (that is, of TRI and YWL) to Rullan in exchange for ten $50, 000 payments to be paid over ten years. ( Id. ¶¶ 67-68.) The Partnership and Stock Agreement also required, among other things, (1) an "equal salary" for Rullan and Goden ( id. ¶ 68(iii)); (2) that Goden and Rullan "relegate" Greenberg "from his debt obligations" related to the Camp, and assume Greenberg's "personal guaranties" ( id. ¶¶ 68(iv)-(v)); (3) that "[b]oth partners" have a right of refusal before the other sell stock in the Camp ( id. ¶ 68(vi)); (4) that decisions "be made by [the] mutual agreement" of Goden and Rullan, and that a procedure be developed to establish a decision-making process ( id. ¶ 68(vii)-(viii)); (5) that Goden and Rullan both approve "any investment or expense for the company for over $5, 000" ( id. ¶ 68(ix)); (6) that $50, 000 of the $55, 000 Rullan had provided to YWI be considered payment for "the first 5% of the total stock of Youth World LTD and... 5% of the total stock of Timber Ridge Inc." owned by Greenberg ( id. ¶ 68(xi)); and (7) that following the agreement, "a due diligence of the company and the additional legal papers required for the transaction... be made" ( id. ¶ 68(xv)). Rullan alleges he would not have entered into the agreement, and would have demanded the return of "his earlier $105, 000 [in] loans, " had he "known the facts" about Greenberg's and the Camp's finances. ( Id. ¶ 71.)
Rullan alleges Greenberg and Goden told Rullan they would provide further financial information to him concerning the Camp, and would "hire an attorney to execute additional legal documents, " but never did so. ( Id. ¶ 73.) Rullan also alleges Goden told him the Camp had sufficient financial resources to pay them both between $72, 000 and $100, 000, but the Partnership and Stock Agreement should not include salary information because Goden wanted to conceal that information from Greenberg. ( Id. ¶¶ 69, 72.) Rullan now believes Goden "did not want a written record of the salary that she agreed Rullan would receive because she knew that the Camp could not afford to pay Rullan even $72, 000, let alone $100, 000, and she never intended for Rullan to receive such a salary." ( Id. ¶ 72.) Rullan received $20, 000 as salary in 2011. ( Id. ¶ 78.)
Throughout 2011 and the beginning of 2012, Goden denied Rullan access to the Camp's financial records, and refused to allow him to supervise employees, limit expenses, or otherwise participate fully in the business. ( Id. ¶ 79.) During this time, the Camp suffered severe financial problems. ( Id. ¶ 80.) Rullan alleges that Goden used the Camp's funds to pay personal and family expenses, including those of Greenberg, and commingled the Camp's funds with her own. ( Id. ¶¶ 82-83.) Goden hired new accountants but refused to allow Rullan to contact them. ( Id. ¶ 85.) As the Camp's financial condition worsened, Goden demanded that Rullan either contribute additional, personal funds to the Camp or bring in many more campers. ( Id. ¶ 87.) During the first five months of 2012, Rullan received only $7, 000 as salary, despite helping recruit 51 European campers. ( Id. ¶¶ 90-91.)
In the spring of 2012, Greenberg's wife passed away. ( Id. ¶ 97.) Rullan alleges Greenberg now had access to a substantial estate, and "wished to renege" on the Partnership and Stock Agreement so that he could involve himself in Camp management. ( Id. ) Without Rullan's knowledge or approval, Greenberg began lending the Camp a substantial amount of money. ( Id. ) In early May 2012, Rullan told Goden he wanted to keep a portion of the deposits he had collected from European campers. ( Id. ¶ 101.) Goden reacted angrily and told him the Camp desperately needed the money. ( Id. ) Rullan sent the money to Goden, but demanded to know when he would be paid, as he had amassed significant personal debt. ( Id. )
On May 18, 2012, Greenberg and Goden attempted to terminate Rullan's association with the Camp by writing him an email indicating they were "unable to offer [him] a position working at Timber Ridge this summer." ( Id. ¶ 102.) On May 20, 2012, Goden sent Rullan an email indicating that if he came to the Camp to retrieve his belongings, which were packed in three sealed boxes, he would "be escorted off [the] property by [the] sheriff, " and "it will be ugly." ( Id. ¶¶ 103-04.) On June 5, 2012, Goden "seized control" of Rullan's Camp email account so that he could not access the account, which contained personal messages as well as correspondence with Rullan's Spanish attorney. ( Id. ¶ 117.) Rullan attempted to purchase additional shares of YWL and TRI, as he believed he was entitled to under the Partnership and Stock Agreement, by tendering one check for $25, 000 to Goden and Greenberg's attorney on January 30, 2013, and another of the same amount on June 29, 2013. ( Id. ¶ 94.) Greenberg did not accept the payments. ( Id. )
Rullan filed this suit on July 14, 2012. Goden and Greenberg filed a motion to dismiss, a motion for a more definite statement, and a motion to strike. The court dismissed without prejudice Rullan's fraud claim for failure to satisfy the heightened pleading standards under Federal Rule of Civil Procedure 9(b), but denied the motion to dismiss as to each of Rullan's other five counts, and denied the motion for a more definite statement and the motion to strike. Rullan moved to join additional defendants, including YWI, YWL, TRI, and the Camp itself, and moved to amend his complaint. Goden and Greenberg filed a motion to dismiss and a motion to strike. On August 18, 2014, Goden filed a suggestion of bankruptcy. Because Rullan moved to amend pursuant to the court's scheduling order, and the motion to dismiss is directed at the amended complaint, the court will grant the motion to amend.
I. Goden's Suggestion of Bankruptcy
On August 18, 2014, Goden filed a suggestion of bankruptcy, advising that she had filed a Chapter 13 bankruptcy petition and the instant case was subject to an automatic stay under 11 U.S.C. § 362(a). When a debtor files for bankruptcy protection, 11 U.S.C. § 362(a)(1) automatically stays "the commencement or continuation... of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the [bankruptcy] case...." 11 U.S.C. § 362(a)(1). Accordingly, Rullan's suit is stayed as to Goden, and the court will not assess claims against her for purposes of resolving the motions at issue here.
II. Rullan's Motion for Joinder of Additional Defendants
On November 4, 2013, Rullan moved to join four additional defendants: YWI, YWL, TRI, and the Camp itself. Greenberg does not oppose the motion to join YWI, and the court therefore will grant the motion as to that entity. Greenberg does, however, oppose the motion to join YWL, TRI, and the Camp itself.
Greenberg argues the Camp may not be added as a defendant because it is owned and operated by TRI and YWL, and is closer "to a desk or a computer" than an entity susceptible to suit. (Def.'s Mot. to Dismiss and Mot. to Strike 2.) Federal Rule of Civil Procedure 17(b)(3) provides that a non-corporate entity's capacity to sue and be sued is governed "by the law of the state where the court is located." In Maryland, "[a]n unincorporated association, joint stock company, or other group which has a recognized group name may sue or be sued in the group name on any cause of action affecting the common property, rights, and liabilities of the group." Md. Code Cts. & Jud. Proc., § 6-406(a). This statute does not, however, expand "the kinds of unincorporated entities that may be sued in their group name to include amorphous groups having no clear separate identity, simply because they have a group name." Bourexis v. Carroll Cnty. Narcotics Task Force, 625 A.2d 391, 396 (Md. Ct. Sp. App. 1993). The Camp has no "clear separate identity" from TRI and YWL, the entities that own and manage it, and Rullan has pointed to no authority suggesting otherwise. Accordingly, the court will deny Rullan's motion to join the Camp as a defendant.
The court will, however, grant Rullan's motion to join YWL and TRI as defendants. Once they are served, YWL, TRI, and YWI may assert whatever arguments they believe are appropriate by way of a motion to dismiss or for summary judgment, including the argument that Rullan has not alleged facts against them sufficient to treat them as defendants in this action. Because the action is stayed as to Goden, and because YWI, YWL, and TRI have not had the opportunity to respond to Rullan's allegations, the court will treat Greenberg as the sole defendant for purposes of resolving the motion to strike and motion to dismiss.
III. The Defendants' Motion to Strike
Greenberg moved to strike various parts of Rullan's amended complaint, as well as the amended complaint as a whole. Federal Rule of Civil Procedure 12(f) permits a district court, on motion of a party, to "order stricken from any pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed.R.Civ.P. 12(f). "Rule 12(f) motions are generally viewed with disfavor because striking a portion of a pleading is a drastic remedy and because it is often sought by the ...