MARK CUHACI, Plaintiff, v. JEAN MARIE ECHEMENDIA, Defendant.
Case No. 20-cv-23950-BLOOM/Louis
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA
October 25, 2021
THIS CAUSE is before the Court upon Defendant Jean Marie Echemendia‘s (“Echemendia“) Motion to Dismiss for Lack of Subject Matter Jurisdiction, ECF No. [124] (“Motion to Dismiss“), filed on July 29, 2021. On August 19, 2021, Plaintiff Mark Cuhaci (“Cuhaci“) filed a Response in Opposition to the Motion to Dismiss, ECF No. [138] (“Response“), to which Defendant filed a Reply, ECF No. [154] (“Reply“). Also before the Court is Kouri Group, LP‘s (“Kouri Group“) Verified Motion for Attorneys’ Fees and Non-Taxable Costs, ECF No. [153] (“Motion for Fees“), filed on September 17, 2021. On October 7, 2021, Plaintiff filed a Response in Opposition to the Motion for Fees, ECF No. [161] (“Response to Motion for Fees“). The Court has carefully reviewed the Motions, all opposing and supporting submissions, the record in this case, the applicable law, and is otherwise fully advised. For the reasons set forth below, the Motion to Dismiss is granted, and the Motion for Fees is denied.
I. BACKGROUND
On September 28, 2020, Cuhaci initiated this action against Echemendia and Kouri Group, concerning his purported ownership of 20,000 shares in SpaceX stock (“Shares“) held by Kouri
On June 23, 2021, Echemendia and Kouri Group filed their respective Answers to the Verified Amended Complaint, ECF Nos. [107] & [108]. In its Answer, Kouri Group challenged the Court‘s subject matter jurisdiction on the basis that complete diversity of citizenship was lacking. ECF No. [107] at 12. Specifically, Kouri Group explained that “[t]here is no diversity among the parties” because “Andrew Kouri, a Canadian, is the general partner of Kouri Investments Limited Partnership which is a partner of Kouri Group, LP” and “[Plaintiff] is also a Canadian.” Id.
On June 29, 2021, the Court entered an Order to Show Cause, instructing Cuhaci to provide the Court with a detailed statement setting forth the basis for his representation that complete diversity exists between Cuhaci and each Defendant in this case. ECF No. [109] (“OSC“). Cuhaci filed his Response to the OSC on July 16, 2021, in which he conceded that there is no diversity of citizenship between himself and Kouri Group, explained that his claims against Echemendia may nonetheless proceed because Cuhaci and Echemendia are diverse, and requested that Kouri Group be dismissed without prejudice. ECF No. [119] (“OSC Response“). The Court then, admittedly
On July 29, 2021, Echemendia filed the instant Motion to Dismiss, ECF No. [124], seeking to dismiss this action in its entirety for lack of subject matter jurisdiction. Specifically, Echemendia argues that “[t]he Court cannot cure the lack of diversity merely by dismissing Kouri Group, because Kouri Group [i.e., the owner of the Shares at issue and party to the Nominee Agreement] is an indispensable party.” Id. at 2; see also
On September 21, 2021, the Court entered an Order of Indicative Ruling Pursuant to
Federal courts are “‘empowered to hear only those cases within the judicial power of the United States as defined by Article III of the Constitution,’ and which have been entrusted to them by a jurisdictional grant authorized by Congress.” Univ. of S. Ala. v. Am. Tobacco Co., 168 F.3d 405, 409 (11th Cir. 1999) (quoting Taylor v. Appleton, 30 F.3d 1365, 1367 (11th Cir. 1994)). As such, a “district court may act sua sponte to address the issue of subject matter jurisdiction at any time.” Herskowitz v. Reid, 187 F. App‘x 911, 912-13 (11th Cir. 2006). Further, “once a federal court determines that it is without subject matter jurisdiction, the court is powerless to continue.” Univ. of S. Ala., 168 F.3d at 410.
District courts have diversity jurisdiction over cases in which the parties are completely diverse and the amount in controversy exceeds $75,000.00. See
“It is well settled that a jurisdictional defect may be ‘cured by the dismissal of the party that . . . destroyed diversity.‘” Landmark Equity II, LLC v. Residential Fund 76, 631 F. App‘x 882, 884
III. DISCUSSION
a. Motion to Dismiss
In the Motion to Dismiss, Echemendia argues that this action should be dismissed in its entirety because Kouri Group is a necessary and indispensable party that otherwise destroys diversity jurisdiction. See generally ECF No. [124]. In his Response, Cuhaci maintains that the Court may properly proceed without Kouri Group and adjudicate the claims against Echemendia individually. See generally ECF No. [138]. Alternatively, Cuhaci requests leave to file a Second Amended Complaint. Id.
Second, if the court concludes that an absent party‘s joinder is required but not feasible—i.e., joinder will defeat the court‘s subject matter jurisdiction—the court must consider if, “in equity and good conscience” the action should proceed among the existing parties or should be dismissed.”
As a threshold matter, the Court finds that each of the Rule 19(a)(1) factors weigh in favor of finding that Kouri Group is a “required party” to this action.
Here, the crux of Cuhaci‘s claims is that he is the owner of the Shares, which are titled in the name of Kouri Group, pursuant to the Nominee Agreement—i.e., the contract entered into between Cuhaci and Kouri Group, not Echemendia. See generally ECF No. [43]. As such, to resolve the litigation, the Court will need to adjudicate whether the Nominee Agreement is valid and enforceable, as well as whether Cuhaci is the legal and equitable owner of the Shares. However, non-joinder of Kouri Group would certainly undermine the Court‘s ability to render complete relief, or any relief at all, as a judgment against Echemendia may not have any preclusive effect on Kouri Group, the absent contracting party. Notably, on July 26, 2021, just one week after
Nevertheless, in his Response, Cuhaci contends that his claims against Echemendia “for conversion, replevin, tortious interference with contract, declaratory and injunctive relief, unjust enrichment, and fraudulent inducement” may properly proceed without Kouri Group because “[t]hese counts seek relief for Echemendia‘s individual actions, taken without the consent of Kouri Group.” ECF No. [138] at 3 (emphasis in original). However, as Echemendia correctly argues, “the claims against Echemendia are inextricably intertwined with Kouri Group‘s rights and obligations[,]” as the terms of the Nominee Agreement, as well as Kouri Group‘s ownership of the Shares are directly at issue in each count:
| Count | Allegations |
|---|---|
| Count II: Conversion |
“Cuhaci is the legal, beneficial and equitable owner of the Shares. As the owner of the Shares, and pursuant to the terms of the Agreement, Cuhaci is entitled to direct any ‘assignments, transfers . . . and other agreements . . . in connection with the Shares.‘” ECF No. [43] ¶ 72 (citation omitted). “By refusing to deliver the physical stock certificate and retitle the Shares, Echemendia is wrongfully detaining the Shares and in doing so, has exceeded the scope of any authority previously granted to Kouri Group regarding possession of the Shares.” Id. ¶ 74. The Nominee Agreement does not authorize Echemendia to deny Cuhaci‘s ownership of the Shares and, in fact, the Nominee Agreement requires that Echemendia, as comanager of Kouri Group, comply with Cuhaci‘s instructions. Id. ¶ 76. Echemendia “claims ownership of the Shares for Kouri Group, and ultimately for the benefit of herself.” Id. ¶ 78. |
| Count III: Replevin | “Cuhaci is the legal and equitable owner of 20,000 shares of SpaceX stock . . . and is entitled to possess the certificate for purposes of effectuating the certificate‘s retitling, as evidenced by the Nominee Agreement, and the verbal agreement between Cuhaci and Greg.” Id. ¶ 83. |
| Count IV: Tortious Interference with Contract |
“The Agreement regarding the ownership of the Shares was originally entered into by Greg and Cuhaci, while Greg was in control of the single-member Kouri Group, LLC.” Id. ¶ 91. “After Greg‘s death, Echemendia became an agent of Kouri Group as the representative of Greg‘s estate, and executed the Nominee Agreement, the terms of which explicitly state that Cuhaci is entitled to direct any “assignments, transfers … and other agreements . . . in connection with the Shares.‘” Id. ¶ 92 (citation omitted). “To the extent that Echemendia argues that her refusal is being performed in her role as an agent of Kouri Group, Echemendia‘s refusal to comply with Cuhaci‘s instructions concerning the transfer of the Shares is not in the best interests of Kouri Group. To the contrary, Echemendia‘s conduct is a purposeful breach of the Nominee Agreement.” Id. ¶ 96. |
| Count V: Declaratory and Injunctive Relief |
“Cuhaci is the rightful legal and equitable owner of the Shares.” Id. ¶ 102. “Pursuant to the Nominee Agreement, Cuhaci is entitled to direct any ‘assignments, transfers . . . and other agreements . . . in connection with the Shares,’ including seeking to retitle the Shares into the name of the Successor Nominee.” Id. ¶ 105. “Echemendia, individually and on behalf of Kouri Group, is intentionally interfering with Cuhaci‘s ownership of the Shares.” Id. ¶ 108. “A genuine and justiciable controversy exists between Cuhaci, Echemendia, and Kouri Group in that there is a bona fide, actual, present, and practical need for a declaration of the parties’ respective rights and obligations as to whether Echemendia and Kouri Group must turn over the physical stock certificate.” Id. ¶ 109. |
| Count VI: Unjust Enrichment |
“Cuhaci conferred a benefit on Kouri Group by providing the $250,000.00 consideration for the purchase of 25,000 shares of SpaceX, with the understanding that Kouri Group would hold his 20,000 shares as Nominee and retain the other 5,000 shares.” Id. ¶ 114. “Echemendia, individually and on behalf of Kouri Group, is now refusing to abide by the terms of the Nominee Agreement and is attempting to retain all 25,000 shares for Kouri Group.” Id. ¶ 116. |
|
“It would be inequitable for Kouri Group to retain the 25,000 shares without paying the value thereof to Cuhaci” and “it would be further inequitable to allow Kouri Group to retain the 25,000 shares by compensating Cuhaci at the current price because Kouri Group would retain any future increased value of the shares.” Id. ¶¶ 117-18. “Cuhaci requests the Court to impose a constructive trust over the 20,000 shares to which he is entitled under the Nominee Agreement, to restore the 20,000 shares to Cuhaci as the rightful owner and prevent unjust enrichment.” Id. ¶ 119. | |
| Count VII: Fraudulent Inducement |
“At the time when Echemendia and Andrew signed the Nominee Agreement and the Acknowledgment and Cancellation of Promissory Note, they represented that they were both managers of the Kouri Group LLC with full authority to act on its behalf[.]” Id. ¶ 122. “Echemendia and Kouri Group are now taking the position that the transfer of the Shares to Cuhaci breaches transfer restrictions . . . and is void.” Id. ¶ 123. “By signing the Nominee Agreement and the Acknowledgment of Cancellation of Promissory Note, both Echemendia and Kouri Group misrepresented to Cuhaci . . . that they intended to abide by the express terms of the Nominee Agreement and the agreement that Greg and Cuhaci had made before Greg‘s death.” Id. ¶ 126. “[I]f the Nominee Agreement is found to be void as requested by Kouri Group, based on Echemendia‘s intentional misrepresentations and omissions, individually and on behalf of Kouri Group, Cuhaci has been damaged by the loss of his $250,000.00 investment, the interest he would have earned thereon, and the gains he would have earned in his investment in SpaceX which is currently valued in excess of $12,272,000.00.” Id. ¶ 131. |
See ECF No. [124] at 5-8. Similarly, Kouri Group is also a “required party” under
Lastly, Kouri Group‘s joinder is required because, due to its interest in this action, both Cuhaci and Echemendia will be “subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations[.]”
ii. Rule 19(b) – Indispensable Party
Because the Court finds that Kouri Group is a required party under
(1) the extent to which a judgment rendered in [its] absence might prejudice [Kouri Group] or the existing parties; (2) the extent to which any prejudice could be lessened or avoided by: (A) protective provisions in the judgment; (B) shaping the relief; or (C) other measures; (3) whether a judgment rendered in [Kouri Group‘s] absence would be adequate; and (4) whether the plaintiff would have an adequate remedy if the action were dismissed for nonjoinder.
Under the first 19(b) factor, the prejudice to Kouri Group and the existing parties to this action closely parallels the Court‘s analysis as to whether Kouri Group is a necessary party under Rule 19(a). See Spear Grp., Inc. v. Fla. Power & Light Co., No. 13-80534-CIV, 2014 WL 272724, at *4 (S.D. Fla. Jan. 23, 2014). As discussed above, Kouri Group would be prejudiced absent joinder because a favorable decision for Cuhaci and against Echemendia would necessarily be
The second Rule 19(b) factor considers “whether there are any available measures for lessening or avoiding the prejudicial effects of rendering a judgment in [Kouri Group‘s] absence” and “‘meshes’ with the third factor[,]” the adequacy of a judgment rendered in Kouri Group‘s absence. Thermoset, 849 F.3d at 1319 (citing
Yet, accepting Cuhaci‘s alternative would not only result in multiple lawsuits on the same essential subject matter, but will also run afoul the interest of the public and the courts in the complete and efficient settlement of controversies. And despite Cuhaci‘s contentions to the contrary, he has already filed suit against Kouri Group in state court arising from the same facts, which effectively demonstrates that Cuhaci cannot obtain complete relief in Kouri Group‘s
Under the fourth Rule 19(b) factor, Cuhaci will have an adequate forum if this action is dismissed. Cuhaci has not argued the inability to obtain complete relief in state court, and the existence of a state court proceeding to which all parties could be joined points in favor of dismissing the entire action instead of proceeding without Kouri Group as a party. Lastly, an additional equitable factor that weighs against allowing this action to continue is the fact that Cuhaci had the burden to prove diversity jurisdiction from the outset of this case—“[a]llowing this action to continue without [Kouri Group] would therefore unfairly reward [Cuhaci] for the jurisdictional defect [he] created and should have known about all along.” Thermoset, 849 F.3d at 1320-21.
b. Motion for Fees
On September 17, 2021, Kouri Group filed a Motion for Fees pursuant to Section IX of the Nominee Agreement, which allows for prevailing party attorneys’ fees and costs after litigation. See ECF No. [153]. Specifically, the Nominee Agreement provides, in pertinent part:
In the event any suit or other action is commenced to construe or enforce any provision of this Agreement, the prevailing party, in addition to all other amounts such party shall be entitled to receive from the other party, shall be paid by the other party a reasonable sum for attorneys’ fees and costs.
ECF No. [43-4] at § IX (emphasis added). Kouri Group contends that because it was dismissed from this action, “awarding legal fees is appropriate under the Nominee Agreement and reflects the fact that Mr. Cuhaci sued Kouri Group in a costly and ultimately failed lawsuit.” ECF No. [153] at 2. The Court is not persuaded.
In the present case, the Court dismissed Kouri Group from this action without prejudice. The only issue the Court decided as to Kouri Group was whether it had jurisdiction over Plaintiff‘s claims considering that Kouri Group‘s presence destroyed diversity. At no point has the Court granted any relief on the merits of Cuhaci‘s claim, nor did the Court‘s dismissal of Kouri Group from this action change the legal relationship between the parties. Indeed, as stated above, Cuhaci has re-filed his claims against Kouri Group in state court. See ECF No. [124-1]; see also United State Sols., LLC v. Powell, No. 19-CV-61970, 2020 WL 3038568, at *1 (S.D. Fla. Apr. 16, 2020) (“A dismissal for lack of subject matter jurisdiction is not a judgment on the merits and is entered without prejudice.” (quoting Stalley ex rel. U.S. v. Orlando Reg‘l Healthcare Sys., Inc., 524 F.3d 1229, 1232 (11th Cir. 2008))); Sream, Inc. v. Smoke This Too, LLC, No. 16-CV-61439, 2017 WL 3025864, at *2 (S.D. Fla. July 14, 2017) (“[A] dismissal without prejudice is not a ‘judgment on the merits’ for purposes of declaring a prevailing party because it does not alter the legal relationship of the parties, as the plaintiff may re-file the case.” (citations omitted)). Therefore, at this juncture, Kouri Group is not entitled to its reasonable attorneys’ fees and costs.
Accordingly, it is ORDERED AND ADJUDGED as follows:
- The Motion to Dismiss, ECF No. [124], is GRANTED.
- The Motion for Fees, ECF No. [153], is DENIED.
- This action is DISMISSED without prejudice for lack of subject matter jurisdiction.
- To the extent not otherwise disposed of, all pending motions are DENIED AS MOOT, any scheduled hearings are CANCELED, and all deadlines are TERMINATED.
- The Clerk of Court is directed to CLOSE this case.
DONE AND ORDERED in Chambers at Miami, Florida, on October 25, 2021.
BETH BLOOM
UNITED STATES DISTRICT JUDGE
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