Chess v. Romine

          ORDER

          STEPHEN P. FRIOT UNITED STATES DISTRICT JUDGE

         Before the court is Defendants' Motion for Summary Judgment, filed May 2, 2019. Doc. no. 60. Plaintiffs have responded to the motion and defendants have replied. Upon due consideration, the court makes its determination.

         Background

         Plaintiffs originally commenced this action in the Superior Court of the State of California, County of San Francisco. In their petition, plaintiffs alleged claims of common-law fraud and violation of the California Business and Professions Code (“Cal. Bus. & Prof. Code”) § 17200 against defendants, Richard E. Romine (“Romine”), Striker Entities, LLC and Does 1-10, ^[1] arising from their purchase of ownership units in certain partnerships organized for the purpose of conducting oil and gas operations.

         Defendants, Romine and Striker Entities, LLC, removed the action to the United States District Court for the Northern District of California, San Francisco Division. The case was assigned to Magistrate Judge Jacqueline Scott Corley. Thereafter, defendants filed a motion to dismiss plaintiffs' complaint, pursuant to Rule 9(b), Rule 12(b)(6) and Rule 12(b)(7), Fed. R. Civ. P., or alternatively, to transfer the action to this court pursuant to 28 U.S.C. § 1404(a). After all parties consented to the jurisdiction of a magistrate judge in accordance with 28 U.S.C. § 636(c), Magistrate Judge Corley entered an order granting defendants' motion to transfer. Because the action was being transferred to this court, Magistrate Judge Corley declined to rule on the motion to dismiss.

         After transfer, this court entered an order denying the motion to dismiss. Subsequently, The Striker Group, LLC, Striker Development, LLC, Striker 2004, LLC, Striker 2005, LLC, and Striker 2008, LLC, moved, under Rule 24, Fed. R. Civ. P., to intervene as defendants. The unopposed motion was granted. All defendants then filed answers to the complaint and alleged counterclaims of breach of contract/anticipatory repudiation and fraud against plaintiffs. By way of their breach of contract/anticipatory repudiation counterclaims, defendants seek to collect on promissory notes executed by plaintiffs relating to the purchase of ownership units in the partnerships managed by defendants.

         Defendants now seek summary judgment under Rule 56(a), Fed. R. Civ. P., with respect to plaintiffs' claims and defendants' counterclaims for breach of contract/anticipatory repudiation.^[2] Defendants argue that summary judgment is appropriate on plaintiffs' claims for two reasons: (1) the claims are barred by the statute of limitations; and (2) two essential elements of the claims - false representation and damages - cannot be established. As to their breach of contract/anticipatory repudiation counterclaims, defendants argue that summary judgment is warranted because the promissory notes are valid and enforceable contracts as to which no viable defense exists.

         Standard of Review

         Federal Rule of Civil Procedure 56(a) provides that “[a] party may move for summary judgment, identifying each claim or defense-or part of each claim or defense-on which summary judgment is sought.” Rule 56(a), Fed.R.Civ.P. Summary judgment is appropriate if “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Id. In deciding whether summary judgment is appropriate, the court does not weigh the evidence and determine the truth of the matter asserted, but only determines whether there is a genuine issue of material fact for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). A dispute is “genuine” “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. at 248. A fact is “material” if under the substantive law it is essential to the proper disposition of the claim. Id. In adjudicating a motion for summary judgment, the court views the evidence and draws all reasonable inferences therefrom in the light most favorable to the nonmoving party. McGehee v. Forest Oil Corporation, 908 F.3d 619, 624 (10th Cir. 2018).

         Plaintiffs' Claims

         A. Statute of Limitations

         Plaintiffs' complaint alleges a common-law fraud claim and a statutory claim under Cal. Bus. & Prof. Code § 17200. Defendants' motion raises a choice-of-law question with respect to plaintiffs' claims as well as their counterclaims: whether California law or Oklahoma law applies. Doc. no. 60, ECF pp. 12-16. As to plaintiffs' claims, defendants assert that California law and Oklahoma law conflict on the issue of the statute of limitations. Id. at ECF pp. 14-15. California law recognizes a three-year statute of limitations for a common-law fraud claim, Cal. Civ. Pro. Code § 338(d), and a four-year statute of limitations for the statutory claim, Cal. Bus. & Prof. Code § 17208. On the other hand, Oklahoma law recognizes a two-year statute of limitations for a common-law fraud claim, 12 O.S. 2011 §95(A)(3) and a three-year statute of limitations for a statutory claim, 12 O.S. 2011 § 95(A)(2).^[3] However, defendants contend that it is not necessary to decide which law applies because plaintiffs' claims are barred either way.

         For summary judgment purposes, the court agrees with defendants that it not necessary to decide whether California law or Oklahoma law applies to plaintiffs' claims, and specifically, the issue of statute of limitations.^[4]

         Initially, the court concludes that defendants are not entitled to summary judgment on the claims of plaintiffs, Bruce Callander, Jeff Drawdy and Susan Drawdy, based upon the statute of limitations.

         In their motion, defendants contend that plaintiffs' common-law fraud and statutory claims are time-barred because the Internal Revenue Service (“IRS”) issued its formal report on the tax audit involving Program 2007-A^[5] on February 10, 2012, more than six years before the date plaintiffs filed suit. According to defendants, plaintiffs were clearly on notice of their common-law fraud and statutory claims, based on future tax audits or tax deduction disallowances, on or shortly after February 10, 2012. However, the evidentiary record pertaining to defendants' motion does not indicate when plaintiffs, ...