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Griaznov v. J-K Technologies, LLC

United States District Court, D. Maryland

March 8, 2017

KONSTANTIN GRIAZNOV Plaintiff/Counterclaim Defendant,
J-K TECHNOLOGIES, LLC. Defendant/Counterclaim Plaintiff.



         Konstantin Griaznov, plaintiff, has filed suit against J.K. Technologies, LLC (“J.K.”), [1]defendant, arising from a dispute in connection with the importation of plaintiff's 2012 McLaren MP4-12C (the “Vehicle”). ECF 1, ¶¶ 6, 7. Under the terms of the parties' “Compliance and Conversion Agreement” (“Agreement”), J.K. agreed, inter alia, to “provide compliance and conversion services concerning the Vehicle for the purpose of satisfying the safety standards promulgated b y” the United States Department of Transportation (“USDOT”) and the United States Environmental Protection Agency (“EPA”). See ECF 17-2 (Agreement).

         Griaznov alleges that J.K. has wrongful possession of the Vehicle. See, e.g., ECF 1, ¶ 68. He seeks, inter alia, a declaration that J.K. cannot retain the Vehicle under Md. Code (2013 Repl. Vol., 2016 Supp.), § 16-202 of the Commercial Law Article (“C.L.”) (“Garageman's Lien Statute”), because that statute is preempted by the National Traffic and Motor Vehicle Safety Act of 1966, as amended and recodified, 49 U.S.C. §§ 30101 et seq. (“Safety Act”). ECF 1, ¶¶ 28-46 (Count I). Griaznov also seeks an injunction requiring J.K. to export the Vehicle to Russia (id. ¶¶ 27, 47-54) (Count II). In addition, he asserts a claim for breach of contract (id. ¶¶ 55-71) (Count III) and Violation of the Maryland Consumer Protection Act, C.L. § 13-101(c)(1) (id.¶¶ 72-87) (Count IV).

         J.K. filed an Answer and a Counterclaim. ECF 7. The Counterclaim contains one count, alleging breach of contract. Id. at 11-12. J.K. asserts that on August 12, 2016, it completed the conversion of the Vehicle to comply with USDOT regulations, and on August 30, 2016, it completed the conversion to meet EPA emissions standards. Id. at 12, ¶¶ 20-21. It seeks $168, 287.82 for breach of the Agreement, representing the research, petition, parts, storage, and conversion of the Vehicle. Id. at 11-12, ¶¶ 13-24.

         Now pending is Griaznov's Motion for Leave to File Amended Complaint (ECF 17), supported by a memorandum (ECF 17-1) (collectively, “Motion”) and exhibits. ECF 17-2 through ECF 17-11. In the proposed amended complaint (ECF 17-10, “Amended Complaint”), plaintiff seeks to add claims for replevin; trespass to chattel; trover and conversion; and additional injunctive relief. See ECF 17-11. In addition, he seeks to add as defendants Lois Joyeusaz and Jonathan Weisheit, the two “members” of J.K. (collectively, “Members”). J.K. opposes the Motion (ECF 19, “Opposition”), and submitted two exhibits with its Opposition. ECF 19-1 and ECF 19-2. Griaznov replied (ECF 20, “Reply”), and appended additional exhibits. ECF 20-1 through ECF 20-7.

         The Motion is fully briefed and no hearing is necessary to resolve it. See Local Rule 105.6. For the reasons that follow, I shall grant the Motion in part and deny it in part.

         I. Factual and Procedural Background[2]

         Griaznov is a citizen of Russia who is domiciled in the State of Florida. ECF 1, ¶ 1. He is the owner of a “2012 McLaren MP4-12C”, which was valued at $278, 597 in July 2013. Id. ¶ 6. J.K. is a limited liability company organized under the laws of Maryland, where it maintains its principal place of business. Id. ¶ 2. J.K. is a “Registered Importer” with the National Highway Traffic Safety Administration (“NHTSA”). Id. ¶ 8; see 49 C.F.R. §§ 592.1 et seq.

         Griaznov and J.K. executed the Agreement on July 12, 2013. ECF 1, ¶ 7; see ECF 17-2 at 6. As noted, under the Agreement, J.K. agreed to “provide compliance and conversion services concerning the Vehicle for the purpose of satisfying the safety standards promulgated” by the USDOT and the EPA. ECF 1, ¶ 7; see also ECF 17-2. The Agreement provided, inter alia, an estimated base cost of $18, 000 for the conversion, a flat fee of $2, 500 “for the preparation and filing of a petition for eligibility”, and a $25 per day storage fee, which would only be assessed under certain conditions. ECF 1, ¶ 9; see ECF 17-2, ¶¶ 7, 8, 11, 13-15. The Agreement also required plaintiff to pay a deposit of $18, 000. ECF 1, ¶ 10; see ECF 17-2 ¶ 7. And, either party “shall have the right to terminate this Agreement for any reason upon thirty (30) days of notice to the other party.” ECF 17-2, ¶ 15.

         Griaznov imported the Vehicle to the United States on or around July 16, 2013. ECF 1 ¶ 12. At that time, J.K. informed Griaznov that a “petition for eligibility had to be filed with NHTSA” to determine whether the Vehicle was eligible for import. Id. ¶ 15.[3] On August 8, 2013, J.K. filed a Petition for Import Eligibility Determination with NHTSA to determine the eligibility for importation of 2012 McLaren MP4-12Cs. Id. ¶ 15. Thereafter, J.K. filed three amended petitions, on December 10, 2013, January 6, 2014, and January 30, 2014. Id. On November 15, 2014, J.K. informed an agent of NHTSA that it had “obtained all parts and programs for the conversion of the Vehicle.” Id. ¶ 17. NHTSA approved the final amended petition on April 3, 2015. Id. ¶ 16.

         On January 16, 2015, after Griaznov “became increasingly frustrated with the amount of time that had passed since the submission of the original petition, [J.K.] indicated that the Contract could be cancelled.” ECF 1, ¶ 18. According to the Complaint, J.K. “informed Mr. Griaznov that he would simply need to pay the petition fee and storage fees [of $25 per day] and that the balance of the deposit would be returned.” Id.

         J.K. subsequently submitted an invoice to Griaznov reflecting $20, 898.16 in charges. Id. ¶ 19 (“First Invoice”).[4] The First Invoice included $250 for the “Translation of Title Documents”; $3, 343.16 for the “Customs Bond”; $14, 550 for storage fees; and $2, 755 for the “Petition of Eligibility.” Id. J.K. applied the $18, 000 deposit to the invoice, resulting in its claim of a balance due and owing in the amount of $2, 898.16. Id. ¶ 20.

         On March 31, 2015, J.K. informed Griaznov that it would prepare a quote for parts and programming. ECF 1, ¶ 21. On April 6, 2015, Griaznov requested a parts list. Id. ¶ 22. Then, on April 23, 2015, J.K. indicated that it was going to “send its chief programmer to California to obtain the parts and programs for the Vehicle . . . .” Id. J.K. indicated that the trip would cost $5, 500 and requested Griaznov's approval. Id. Griaznov did not approve the trip. Id. ¶ 23. J.K. submitted the parts list on May 15, 2015. Id. ¶ 25.

         “Soon thereafter, Mr. Griaznov cancelled the Contract and informed J.K. . . . that he would like to export the Vehicle to Russia.” Id. ¶ 25. Griaznov insists that he never approved the purchase of any parts or the provision of any labor for the conversion of the Vehicle. Id.

         On June 30, 2015, J.K. submitted a second invoice to Griaznov. Id. ¶ 26; see ECF 17-4 (Invoice No. 1965, “Second Invoice”). The Second Invoice reflected total charges of $41, 069.87, including $29, 919.87 for parts; $8, 100 for labor; and $3, 050 for storage. ECF 1 ¶ 26; see ECF 17-4.[5] Despite plaintiff's “numerous” requests, J.K would not export the Vehicle until it received payment of the outstanding balance. ECF 1, ¶ 27.

         In the Motion, Griaznov claims that new information came to light following the initiation of the suit. He asserts that J.K.'s Counterclaim “revealed, for the first time, that [J.K.] completed the conversion [of the Vehicle] on or about August 12, 2016.” ECF 17-1 at 3; see ECF 7 at 12, ¶ 20. Plaintiff also notes that the Counterclaim states that the cost due to J.K. is now $168, 287.82. ECF 17-1 at 3; see ECF 7 at 12, ¶ 24.

         In support of J.K.'s Opposition, Weisheit submitted an Affidavit providing additional details as to the status of the Vehicle during the spring and summer of 2015. ECF 19-1. He avers that all work “on the conversion of the Vehicle was completed by J.K. in the April/May time period of 2016.” Id. ¶ 8. According to Weisheit, after J.K. completed its work, J.K. “was required by law to have the manufacturer of the Vehicle (McLaren) remedy any recalls.” Id. ¶ 9. On June 14, 2016, “the Vehicle was sent to McLaren to have multiple factory recalls performed and was completely serviced and checked over by the manufacturer's representatives.” Id. ¶ 10. Weisheit claims that J.K. paid McLaren $10, 610.31 for those services. Id. According to Weisheit, J.K. did not receive the Vehicle from McLaren until July 15, 2016. Id. ¶ 11. And, on August 12, 2016, USDOT released the bond on the Vehicle. Id. ¶¶ 13-15. The bond with the EPA and U.S. Customs was released on August 30, 2016. Id.

         On November 3, 2016, the parties agreed to “maintain the status quo.” ECF 19-2 (letter confirming status quo agreement). In particular, J.K. agreed to “refrain from altering, modifying, damaging, destroying, and/or selling the Vehicle”, and to retain the Vehicle “in a secured location while the [case] is pending.” Id.

         II. Standard of Review

         Fed. R. Civ. P. 15(a)(2) states: “[A] party may amend its pleading only with the opposing party's written consent or the court's leave. The court should freely give leave when justice so requires.” See also Foman v. Davis, 371 U.S. 178, 182 (1962); Talley v. Ocwen Loan Servicing, LLC., ___ Fed. App'x ___, No. 16-1478, 2017 WL 218858 at *1 (4th Cir. Jan. 19, 2017) (per curiam); Goode v. Cent. Virginia Legal Aid Soc'y, Inc., 807 F.3d 619, 628 (4th Cir. 2015).

         Under Rule 15(a), the district court has “broad discretion concerning motions to amend pleadings . . . .” Booth v. Maryland, 337 Fed. App'x 301, 312 (4th Cir. 2009) (per curiam); see also Foman, 371 U.S. at 182; Laber v. Harvey, 438 F.3d 404, 426-29 (4th Cir. 2006) (en banc). A district court may deny a motion to amend for reasons “‘such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment or futility of the amendment.'” Booth, 337 Fed. App'x at 312 (quoting Foman, 371 U.S. at 182).

         “Delay alone is an insufficient reason to deny leave to amend.” Edwards v. City of Goldsboro, 178 F.3d 231, 242 (4th Cir. 1999) (citation omitted); see also Davis v. Piper Aircraft Corp., 615 F.2d 606, 613 (4th Cir. 1980) (“Delay alone however, without any specifically resulting prejudice, or any obvious design by dilatoriness to harass the opponent, should not suffice as reason for denial.”); Brightwell v. Hershberger, DKC-11-3278, 2015 WL 5315757, at *3 (D. Md. Sept. 10, 2015) (“Delay, however, ‘cannot block an amendment which does not prejudice the opposing party.'”) (quoting Frank M. McDermott, Ltd. v. Moretz, 898 F.2d 418, 421 (4th Cir. 1990)). “Rather, the delay must be accompanied by prejudice, bad faith, or futility.” Edwards, 178 F.3d at 242 (citation omitted); see Simmons v. United Mortg. & Loan Inv., LLC, 634 F.3d 754, 769 (4th Cir. 2011); Equal Rights Center v. Niles Bolton Assocs., 602 F.3d 597, 603 (4th Cir. 2010); Nourison Rug Corp. v. Parvizian, 535 F.3d 295, 298 (4th Cir. 2008); Steinburg v. Chesterfield Cnty. Planning Comm'n, 527 F.3d 377, 390 (4th Cir. 2008).

         “Perhaps the most important factor listed by the [Supreme] Court for denying leave to amend is that the opposing party will be prejudiced if the movant is permitted to alter a pleading.” 6 C. Wright & A. Miller, Federal Practice and Procedure § 1487 at 701 (3d ed.) (“Wright & Miller”) (citing Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321 (1971); United States v. Hougham, 364 U.S. 310 (1960)). The burden of showing prejudice falls on “the party opposing amendment.” Atl. Bulk Carrier Corp. v. Milan Exp. Co., 3:10-cv-103, 2010 WL 2929612, at *4 (E.D. Va. July 23, 2010). “[I]f the court is persuaded that no prejudice will accrue, the amendment should be allowed.” Wright & Miller, § 1487 at 701.

         In Newport News Holdings Corp. v. Virtual City Vision, Inc., 650 F.3d 423, 439 (4th Cir. 2011), the Court said: “‘Whether an amendment is prejudicial will often be determined by the nature of the amendment and its timing . . . . [T]he further the case progressed before judgment was entered, the more likely it is that the amendment will prejudice the defendant . . . . '” (quoting Laber, 438 F.3d at 427) (alteration in Laber). To be sure, “prejudice can result where a proposed amendment raises a new legal theory that would require the gathering and analysis of facts not already considered by the opposing party, but that basis for a finding of prejudice essentially applies where the amendment is offered shortly before or during trial.” Johnson v. Oroweat Foods Co., 785 F.2d 503, 510 (4th Cir. 1986). In contrast, “[a]n amendment is not prejudicial . . . if it merely adds an additional theory of recovery to the facts already pled and is offered before any discovery has occurred.” Laber, 438 F.3d at 427 (emphasis added). Therefore, the court must examine the facts of each case “to determine if the threat of prejudice is sufficient to justify denying leave to amend.” Wright & Miller, § 1487 at 701.

         Furthermore, a proposed amendment must not be futile. See Foman, 371 U.S. at 182. According to the Fourth Circuit, a proposed amendment should be denied as futile “when the proposed amendment is clearly insufficient or frivolous on its face.” Johnson, 785 F.2d at 510; see also Wright & Miller § 1487 (“[A] proposed amendment that clearly is frivolous, advancing a claim or defense that is legally insufficient on its face, [] or that fails to include allegations to cure defects in the original pleading, [] should be denied.”). A motion to amend can also be denied on the basis of futility where the proposed amendment “could not withstand a motion to dismiss.” Perkins v. United States, 55 F.3d 910, 917 (4th Cir. 1995); see also Devil's Advocate, LLC v. Zurich Am. Ins. Co., ___ Fed. App'x ___, No. 15-1048, 2016 WL 6871905, at *8 (4th Cir. Nov. 22, 2016) (per curiam) (affirming district court's denial of leave to amend on the basis of futility, because the amended complaint would not survive a motion to dismiss under Rule 12(b)(6)); Moretz, 898 F.2d at 420-21 (“There is no error in disallowing an amendment when the claim sought to be pleaded by amendment plainly would be subject to a motion to dismiss under Fed.R.Civ.P. 12(b)(6).”).

         But, the review for futility “is not equivalent to an evaluation of the underlying merits of the case. To the contrary, ‘[u]nless a proposed amendment may clearly be seen to be futile because of substantive or procedural considerations, . . . conjecture about the merits of the litigation should not enter into the decision whether to allow amendment.'” Next Generation Grp., LLC v. Sylvan Learning Ctrs., LLC, CCB-11-0986, 2012 WL 37397, at *3 (D. Md. Jan. 5, 2012) (quoting Davis, 615 F.2d at 613).

         Here, the motion for leave to amend was timely filed within the time provided by the Court's Scheduling Order. See ECF 12. Nor is there a basis to find prejudice due to delay. See Id. However, as noted, leave to amend may also denied if the proposed amendment would not survive a motion to dismiss under Rule 12(b)(6). See, e.g., Perkins, 55 F.3d at 917. Therefore, I will briefly review the standard for dismissal under Rule 12(b)(6).

         A defendant may test the legal sufficiency of a complaint by way of a motion to dismiss under Rule 12(b)(6). Goines v. Valley Cmty, Servs, Bd., 822 F.3d 159, 165-66 (4th Cir. 2016); McBurney v. Cuccinelli, 616 F.3d 393, 408 (4th Cir. 2010), aff'd sub nom. McBurney v. Young, ___U.S. ___, 133 S.Ct. 1709 (2013); Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999). A Rule 12(b)(6) motion constitutes an assertion by a defendant that, even if the facts alleged by a plaintiff are true, the complaint fails as a matter of law “to state a claim upon which relief can be granted.” Whether a complaint states a claim for relief is assessed by reference to the pleading requirements of Fed.R.Civ.P. 8(a)(2). It provides that a complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” The purpose of the rule is to provide the defendants with “fair notice” of the claims and the “grounds” for entitlement to relief. Bell Atl., Corp. v. Twombly, 550 U.S. 544, 555-56 (2007).

         To survive a motion under Fed.R.Civ.P. 12(b)(6), a complaint must contain facts sufficient to “state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570; see Ashcroft v. Iqbal, 556 U.S. 662, 684 (2009) (“Our decision in Twombly expounded the pleading standard for ‘all civil actions' . . . .” (citation omitted)); see also Hall v. DirecTV, LLC, ___F.3d ___, No. 15-1857, 2017 WL 361065, at *4 (4th Cir. Jan. 25, 2017). But, a plaintiff need not include “detailed factual allegations” in order to satisfy Rule 8(a)(2). Twombly, 550 U.S. at 555. Moreover, federal pleading rules “do not countenance dismissal of a complaint for imperfect statement of the legal theory supporting the claim asserted.” Johnson v. City of Shelby, ___ U.S. ___, 135 S.Ct. 346, 346 (2014) (per curiam).

         Nevertheless, the rule demands more than bald accusations or mere speculation. Twombly, 550 U.S. at 555; see Painter's Mill Grille, LLC v. Brown, 716 F.3d 342, 350 (4th Cir. 2013). If a complaint provides no more than “labels and conclusions” or “a formulaic recitation of the elements of a cause of action, ” it is insufficient. Twombly, 550 U.S. at 555. Rather, to satisfy the minimal requirements of Rule 8(a)(2), the complaint must set forth “enough factual matter (taken as true) to suggest” a cognizable cause of action, “even if . . . [the] actual proof of those facts is improbable and . . . recovery is very remote and unlikely.” Twombly, 550 U.S. at 556 (internal quotations omitted).

         III. Discussion

         As noted, Griaznov seeks to amend his Complaint to add as defendants the sole Members of J.K., Lois Joyeusaz and Jonathan Weisheit, and to assert several new claims.

         A. Addition of Individual Defendants

         Griaznov's Amended Complaint seeks to add as defendants the two Members of J.K.: Joyeusaz and Weisheit. See, e.g., ECF 17-1 at 5. According to Griaznov, the Members are liable for the torts of J.K. because they personally “committed, inspired, or participated” in J.K.'s “tortious conduct.” ECF 20 at 16. J.K. opposes the amendment, claiming it is brought in bad faith and based on futility. ECF 19.

         It is well settled that “[a] corporation exists as a legal entity separate and distinct from its corporate shareholders.” Cancun Adventure Tours, Inc. v. Underwater Designer Co., 862 F.2d 1044, 1047 (4th Cir. 1988); see Johnson v. Flowers Indus., Inc., 814 F.2d 978, 980 (4th Cir. 1987). Notably, a corporation is a “‘creature of legal fiction, '” and “‘ a corporation must of necessity act through its agents . . . . '” Southern Management Corp. v. Taha, 378 Md. 461, 480, 836 A.2d 627, 638 (2003) (citations omitted). Similarly, under Maryland law, a member of a limited liability company (“LLC”) is not “personally liable for the obligations of the limited liability company, whether arising in contract, tort or otherwise, solely by reason of being a member of the limited liability company.” Md. Code (2014 Repl. Vol., 2016 Supp.), § 4A-301 of the Corporations & Associations Article; see Allen v. Dackman, 413 Md. 132, 158, 991 A.2d 1216, 1228 (2010) (“[A] member of an LLC generally is not liable for torts committed by, or contractual obligations acquired by, the LLC.”). And, “a person cannot be held liable under a contract to which he was not a party. . . .” Residential Warranty Corp. v. Bancroft Homes Greenspring Valley, Inc., 126 Md.App. 294, 316, 728 A.2d 783, 794 (1999).

         The concept of a corporation as a separate legal entity “is expressed by the colorful metaphor of the corporate veil, which presumes that acts of the corporation are not acts of the shareholder.” Johnson, 814 F.2d at 980. The corporate veil doctrine “is a basic attribute of the corporate form; it encourages business investment and fosters stability in commercial transactions.” Cancun Adventure, 862 F.2d at 1047. The same logic applies to a LLC.

         In Bart Arconti & Sons, Inc. v. Ames-Ennis, Inc., 275 Md. 295, 340 A.2d 225, 234 (1975), the Maryland Court of Appeals observed that, in the absence of fraud or unless necessary to enforce a paramount equity, shareholders are generally not liable for the acts of a corporation. It said, id. at 310, 340 A.2d at 234:

The most frequently enunciated rule in Maryland is that although courts will, in a proper case, disregard the corporate entity and deal with substance rather than form, as though a corporation did not exist, shareholders generally are not held individually liable for debts or obligations of a corporation ...

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