United States District Court, D. Nevada
MICHAEL J. WELLS, Plaintiff,
LINDA McMAHON, in her official capacity as the Administrator of the U.S. Small Business Administration, and the NEVADA STATE DEVELOPMENT CORPORATION, Defendants.
R. HICKS, UNITED STATES DISTRICT JUDGE.
Linda McMahon, in her official capacity as the Administrator
of the United States Small Business Administration
("SBA") and the Nevada State Development
Corporation ("NSDC") have each filed separate
motions to dismiss (ECF Nos. 8, 13) the complaint of
plaintiff Michael J. Wells (ECF No. 1-2). Wells filed
responses to both sets of motions (ECF Nos. 10, 27), and the
moving parties timely replied (ECF Nos. 11, 38). For the
reasons stated below, the Court grants the SBA's motion
to dismiss and the NSDC's motion to dismiss.
Factual Background and Procedural History
following facts are adduced from Wells's complaint,
which, for the purpose of resolving the motions to dismiss,
are presumed to be true. Wells was an investor in, and the
manager of, a company called Main Street Galleria, LLC. (ECF
No. 1-2 at 5). On December 27, 2007, NSDC executed an SBA
loan for $1, 789, 000 (SBA loan #2253116004) to the Frontier
Fun Center, Inc., an entity associated with the Main Street
Galleria. (Id.) The borrower listed on the loan was
the Main Street Galleria. (Id.) On January 2, 2009,
Wells signed an "Unconditional Guarantee"
("UG") with the SBA (form number 148, October 1998
edition). (Id.) Wells was listed as the Guarantor on
the loan, the Main Street Galleria was listed as the
Borrower, and NSDC was listed as the Lender. (Id. at
20). Pursuant to the UG, Wells waived "to the extent
permitted by law, many and numerous conceivable rights he may
have had as a debtor and guarantor, including rights of
redemption of collateral, rights to notice of almost any
stripe, and nearly all contractual, equitable, and other
defenses, including commercial responsibility on the part of
the Lender in collecting and enforcing the debt and
guarantee." (Id. at 6). In the event that Wells
defaulted on the SBA loan, the SBA would "purchase"
the loan from NSDC.
defaulted on the loan sometime between February 1 and April
30, 2010. (ECF No. 1-2 at 6). Pursuant to the UG, the SBA
purchased the loan from NDSC on May 1 2010. (Id.) On
June 4, 2010, Wells asserts that the SBA was required to
accelerate the loan "as delineated in the Deed of Trust
with the recording of a Notice of Default," but it
failed to do so. (Id.) According to Wells, the NSDC
was responsible for liquidation activities until it tendered
its final wrap-up report on February 23, 2012. Despite its
obligations, neither it nor the SBA followed federal laws and
regulations regarding the notice and due process provisions.
(Id.) For instance, on March 26, 2012, the SBA sent
default letters to various guarantors related to the Frontier
Fun Center project, but Wells was not among them.
(Id.) Because of the SBA inaction, Wells alleges
thai he was unable to take any action to save the underlying
Frontier Fun Center project. (Id. at 7). On October
23, 2012, the SBA charged off the loan, and on March 4, 2014,
it referred the lean to the U.S. Department of the Treasury
for collection through the Treasury Offset Program.
(Id. at 6).
alleges that he first received notice about the status of the
loan fro:n the Treasury Department on March 5, 2014, when it
sent him a notice of unpaid delinquent debt. (ECF No. 1-2 at
7). Wells disputed the debt, but on May 7, 2014, the Treasury
Department referred the debt to a private debt collection
company for "further enforcement" and collection.
(Id.) After disputing the debt with the private
company, the company "ceased" enforced collection
activities and promised to investigate the validity of the
Treasury claim. (Id.) Wells alleges that he did nol
hear from that private company again. On May 20, 2015, Wells
asserts that a different private coll action company
contacted him regarding the SBA loan and that he once again
disputed it, but this collection company ignored his dispute.
(Id.) Instead, it sent a notice of Administrative
Wage Garnishment ("AWG") to Wells, and he responded
by tendering a request for an AWG hearing. (Id.).
Wells lodged objections to the collection of his alleged debt
on July 19 and September 7, 2017. (Id.) Despite his
objections, the SBA issued a "Garnishment Hearing
Decision" that rejected Wells's objections and
ordered a garnishment of 15% of his disposable monthly
income. (Id. at 8).
filed this action in Nevada state court on January 10, 2018.
(ECF No. 1-2). In his complaint, he alleges six causes of
action against both NSDC and the SBA: (1) common law breach
of contract; (2) breach of the implied covenant of good faith
and fair dealing; (3) equitable subrogation; (4) violation of
his right to procedural due process; (5) a declaration of his
rights under the SBA loan; and (6) injunctive relief against
defendants from collecting on the alleged debt. The SBA
removed the action to federal court on June 21, 2018. (ECF
No. 1). Both the SBA and NSDC now seek dismissal of
and NSDC both request dismissal pursuant to Federal Rule of
Civil Procedure 12(b)(6) for failure to state a claim upon
which relief can be granted. To survive a motion to dismiss
for failure to state a claim, a complaint must satisfy
Federal Rule of Civil Procedure 8(a)(2)'s notice pleading
standard. See Mendiondo v. Centinela Hosp. Med. Or.,
521 F.3d 1097, 1103 (9th Cir. 2008). That is, a complaint
must contain "a short and plain statement of the claim
showing that the pleader is entitled to relief."
Fed.R.Civ.P. 8(a)(2). The Rule 8(a)(2) pleading standard does
not require detailed factual allegations; a pleading,
however, that offers" 'labels and conclusions'
or 'a formulaic recitation of the elements of a cause of
action'" will not suffice. Ashcroft v.
Iqbal, 556 U.S. 662, 677 (2009) (quoting Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)).
Rule 8(a)(2) requires a complaint to "contain sufficient
factual matter, accepted as true, to 'state a claim to
relief that is plausible on its face.'"
Iqbal, 556 U.S. at 667 (quoting Twombly,
550 U.S. at 570). A claim has facial plausibility when the
pleaded factual content allows the court to draw the
reasonable inference, based on the court's judicial
experience and common sense, that the defendant is liable for
the misconduct alleged. Id. "The plausibility
standard is not akin to a probability requirement, but it
asks for more than a sheer possibility that a defendant has
acted unlawfully. Where a complaint pleads facts that are
merely consistent with a defendant's liability, it stops
short of the line between possibility and plausibility of
entitlement to relief. Id.
reviewing a motion to dismiss, the court accepts the facts
alleged in the complaint as true. Iqbal, 556 U.S. at
667. Even so, "bare assertions. . .amount[ing] to
nothing more than a formulaic recitation of the elements of
a. . .claim. . .are not entitled to an assumption of
truth." Moss v. U.S. Secret Serv., 572 F.3d
962, 969 (9th Cir. 2009) (quoting Iqbal, 556 U.S. at
681) (brackets in original) (internal quotation marks
omitted). The court discounts these allegations because
"they do nothing more than state a legal conclusion-even
if that conclusion is cast in the form of a factual
allegation." Id. (citing Iqbal, 556
U.S. at 681.) "In sum, for a complaint to survive a
motion to dismiss, the non-conclusory 'factual
content,' and reasonable inferences from that content,
must be plausibly suggestive of a claim entitling the
plaintiff to relief." la.
alternative to dismissal, NSDC requests summary judgment on
all Wells's claims. Summary judgment is appropriate only
when the pleadings, deposition', answers to
interrogatories, and admissions on file, together with the
affidavits, if any, show 'that there is no genuine issue
as to any material fact and that the [moving party] is
entitled to judgment as a matter of law." Fed. R. Crv.
P. 56(c). In assessing a motion for summary judgment, the
evidence, together with all inferences mat can reasonably be
drawn therefrom, must be read in the light most favorable to
the party opposing the motion. Matsushita Elec. Indus.
Co. v. Zenith Radio Corp, 475 U.S. 574, 587 (1986);
Cnty of Tuolumne v. Sonora Cmty. Hosp., 236 F.3d
1148, 1154 (9th Cir. 2001). The moving party bears the burden
of informing the court of the basis for its motion, along
with evidence showing the absence of any genuine issue of
material fact. Celotex Corp. v. Catrett, 477 U.S.
317, 323 (1986). On those issues for which it bears the
burden of proof, the moving party must make a showing that is
"sufficient for the court to hold that no reasonable
trier of fact could find other than for the moving
party." Calderone v. United States, 799 F.2d
254, 259 (6th Cir. 1986).
successfully rebut a motion for summary judgment, the
non-moving party must point to facts supported by the record
which demonstrate a genuine issue of material fact. Reese
v. Jefferson Sch. Dist. No. 14J, 208 F.3d 736 (9th Cir.
2000). A "material fact" is a fact "that might
affect the outcome of the suit under the governing law."
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). Where reasonable minds could differ on the material
facts at issue, summary judgment is not appropriate. See
v. Durang, 711 F.2d 141, 143 (9th Cir. 1983). A dispute
regarding a material fact is considered genuine "if the
evidence is such that a reasonable jury could return a
verdict for the non-moving party." Liberty
Lobby, 477 U.S. at 248. The mere existence of a
scintilla of evidence in support of the non-moving
party's position is insufficient to establish a genuine
dispute; there must be evidence on which the jury could
reasonably find for the non-moving party. See Id. at