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Klein v. Johnson

United States District Court, D. Utah

December 9, 2019

R. WAYNE KLEIN, as Receiver, Plaintiff,
LAGRAND T. JOHNSON, an individual and trusee of the YOTSUYA FAMILY TRUST, Defendants.

          Paul Kohler Magistrate Judge.


          David Nuffer United States District Judge.

         Plaintiff R. Wayne Klein was appointed as receiver in United States v. RaPower-3, LLC, et al., Case No. 2:15-cv-00828-DN-EJF (D. Utah) (“RaPower-3”), over RaPower-3, LLC (“RaPower”), International Automated Systems Inc. (“IAS”), LTB1 LLC (“LTB1”), their subsidiaries and affiliates (collectively, the “Receivership Entities”), and the assets of Neldon Johnson and R. Gregory Shepard.[1] As the receiver in RaPower-3, Plaintiff moved to cancel IAS shares.[2] That motion was granted.[3]

         For the benefit of the receivership estate, Plaintiff subsequently initiated this case to recover funds that are alleged to have been improperly transferred to Defendants from the Receivership Entities.[4] Defendant LaGrand Johnson asserted counterclaims against Plaintiff for inverse condemnation and a Bivens violation of due process relating to the cancellation of the IAS shares.[5]

         Plaintiff now seeks dismissal of Defendant's counterclaims under Fed. R. Civ. P. 12(b)(1) (“Motion”).[6] Because subject matter jurisdiction over Defendant's counterclaims is lacking, Plaintiff's Motion[7] is GRANTED. Defendant's counterclaims[8] are DISMISSED without prejudice.


         Plaintiff moves to dismiss Defendant's counterclaims under Fed. R. Civ. P. 12(b)(1), [9]which is “jurisdictional in nature.”[10] In responding to the Motion, Defendant argues that “[u]nder the standards of review for a motion to dismiss . . . the allegations of the counterclaim must be taken as true and the court must draw all reasonable inferences in favor of the non-moving party.”[11] Defendant is mistaken. Defendant identifies the standard of review for a motion under Fed. R. Civ. P. 12(b)(6), [12] which differs from the standard of review on Plaintiff's Motion made under Rule 12(b)(1).

         A Rule 12(b)(1) motion to dismiss may take one of two forms: The motion may be a facial attack that “questions the sufficiency of the complaint;”[13] Or, the motion may be a factual attack that “challenge[s] the facts upon which subject matter jurisdiction depends.”[14] When the challenge to the complaint is a facial challenge, “a district court must accept the allegations in the complaint as true.”[15] However, on a factual challenge, the court is not required to accept the complaint's allegations as true and “may not presume” that they are true.[16] A factual Rule “12(b)(1) motion is considered a ‘speaking motion' and can include references to evidence extraneous to the complaint.”[17] And the court enjoys “wide discretion to . . . resolve disputed jurisdictional facts.[18]

         Plaintiff's Motion is a factual challenge under Rule 12(b)(1) because it challenges the facts underlying the purported jurisdiction over Defendant's counterclaims.[19] Plaintiff argues that the counterclaims are barred under the Barton doctrine and the RaPower-3 Receivership Order.[20] Plaintiff also argues that he is immune from suit as a receiver.[21] Defendant argues in response that the Barton doctrine barring jurisdiction does not apply because Plaintiff's actions were ultra vires.[22] Defendant also argues that the issue of Plaintiff's immunity is not properly raised on a motion to dismiss.[23]


         Defendant's counterclaims are barred by the Barton Doctrine and the RaPower-3 Receivership Order

         Plaintiff argues that Defendant's counterclaims should be dismissed because Defendant did not obtain leave to bring them.[24] The United States Supreme Court held in Barton v. Barbour that “before suit is brought against a receiver[, ] leave of the court by which he was appointed must be obtained.”[25] The Barton doctrine bars claims based on a receiver's actions arising from their official duties, out of a concern that allowing receivers to be vulnerable to suit would render the courts unable to “preserve and distribute” relevant property.[26]

         Defendant contends that the Barton doctrine does not apply if a receiver acted ultra vires.[27] But Defendant does not clarify which specific acts were outside of Plaintiff's court-appointed authority. In the RaPower-3 Receivership Order, the court ordered Plaintiff to “provide a recommendation” regarding whether IAS should be “liquidated or dissolved.”[28] The Receivership Order further directed that, should liquidation be appropriate, “the Receiver shall propose a liquidation plan.”[29]

         Plaintiff followed this directive and drafted a plan of liquidation[30] and moved for the cancellation of IAS shares.[31] The liquidation plan was adopted[32] and the court-not the Plaintiff-cancelled the IAS shares.[33] Plaintiff's acts were not ultra vires. They were within the scope of Plaintiff's court-appointed authority. Therefore, the Barton doctrine applies to Defendant's counterclaims. And because Defendant did not seek leave to file the counterclaims in RaPower-3, the Barton doctrine bars the counterclaims.

         Additionally, and separate from the Barton doctrine, the court in RaPower-3 ordered that ancillary “actions of any nature involving [] the Receiver in his capacity as Receiver” are “stayed until further order of this Court.”[34] That stay of actions has not been lifted as to Defendant's counterclaims. Therefore, Defendant's counterclaims violate the stay of actions imposed in RaPower-3.

         Because the Barton doctrine bars Defendant's counterclaims, and because the counterclaims violate the stay of actions imposed in RaPower-3, subject matter jurisdiction over the counterclaims is lacking.

         Defendant fails to address how Plaintiff is not immune from suit or how orders entered in RaPower-3 may be challenged in this separate action

         Defendant's counterclaim for inverse condemnation alleges a violation of constitutional rights by the cancellation of the IAS shares under a takings theory.[35] Defendant's counterclaim for a Bivens violation alleges that the cancellation of the IAS shares violated Defendant's due process rights.[36] Plaintiff argues that Defendant cannot succeed on either counterclaim because the cancellation of the IAS shares was court ordered and because Plaintiff is immune from suit.[37]

         Defendant's counterclaims effectively seek collateral review of judicial orders entered in RaPower-3 relating to Plaintiffs authority as a receiver and the cancellation of IAS shares. But “a receiver who faithfully and carefully carries out the orders of his appointing judge must share the judge's absolute immunity.”[38] This is the case even where constitutional violations are alleged.[39] Defendant fails to address how Plaintiff, acting as a receiver under court authority, is not immune from suit. And Defendant cites no legal authority that ...

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