Rockwell Capital Partners, Inc. v. CD Int'l Enters., Inc.
Rockwell Capital Partners, Inc. v. CD Int'l Enters., Inc.
Opinion of the Court
In 2016, CD International Enterprises ("CDII") unsuccessfully sued Rockwell Capital Partners over a promissory note. Turning the tables, Rockwell now brings suit against CDII and its attorney-New Orleans sole practitioner Henry L. Klein-for various claims arising from the first lawsuit. CDII and Klein have filed a motion for judgment on the pleadings with respect to two of the claims: abuse of process and malicious prosecution. Because Rockwell fails to adequately plead those claims, the Court will dismiss them and stay the remaining claims, which are brought only against CDII, in light of the company's recent suggestion of bankruptcy.
I. Background
This suit stems from another case that this Court dismissed in 2016. To recap the basic facts of that case: CDII is a small, family-run trading company focused on Asian markets. In September 2015, Rockwell agreed to assume some of CDII's debt in exchange for a promissory note that permitted Rockwell to convert the debt into CDII stock at a discounted price. Compl. ¶¶ 22, 25. After Rockwell quickly began to exercise its conversion rights and sell its newly acquired stock at a profit, CDII's share price fell dramatically. Id. ¶¶ 31-36. CDII, represented by Henry Klein, then sued Rockwell, its principal, *54and two other defendants. CD International Enterprises, Inc. v. Rockwell Capital Partners, Inc.,
The Court granted Rockwell's motion to dismiss on April 24, 2017. While noting that profiting at CDII's expense may well have been Rockwell's goal from the outset, the Court nonetheless concluded that "because Rockwell's actions were consistent with the parties' negotiated, written agreements, no cause of action lies." CD Int'l Enterprises, Inc. v. Rockwell Capital Partners, Inc.,
Which brings us to the current suit. On July 31, 2017, Rockwell filed a complaint alleging that CDII and Klein knew that their claims in the 2016 lawsuit "were not warranted by applicable law and that its alleged factual contentions were without evidentiary support." Compl. ¶ 1. Rockwell also contends that CDII and Klein filed "frivolous motions" intended to drive up Rockwell's attorneys' fees and force it to loan additional money to CDII. Id. ¶¶ 2-4. Rockwell further alleges that CDII and Klein entered into agreements with other institutional investors both before and after filing the lawsuit that had "essentially the same or worse terms than [CDII] complained of against Rockwell" in the 2016 lawsuit, yet chose not to sue those investors. Id. ¶¶ 39-68. Finally, in support of its malicious prosecution claim, Rockwell claims that prospective business partners and clients expressed concerns about doing business with Rockwell as a result of the 2016 lawsuit, which led to it losing deals, revenue, and the "possibility of future transactions." Id. ¶¶ 104-05.
The complaint invokes the Court's diversity jurisdiction and includes five claims: tortious interference with contract and prospective economic advantage (against CDII); breach of contract (against CDII); breach of implied duty of good faith (against CDII); abuse of process (against CDII and Klein); and malicious prosecution (against CDII and Klein). Following a hearing on November 17, 2017, CDII and Klein filed a motion for judgment on the pleadings on Rockwell's abuse of process and malicious prosecution claims. And on February 7, 2018, CDII filed a "suggestion of bankruptcy," thus triggering the automatic stay provision of the Bankruptcy Code,
II. Standard of Review
In resolving a motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c), a court must "view the facts presented in the pleadings and the inferences to be drawn therefrom in the light most favorable to the nonmoving *55party." Peters v. National R.R. Passenger Corp.,
III. Analysis
A. Abuse of Process
The crux of Rockwell's abuse of process claim is that CDII and Klein filed the 2016 lawsuit and subsequent "baseless motions" in order to force Rockwell to incur "extraordinary" legal expenses and ultimately "extort Rockwell into providing additional funds to CDII." Opp'n at 7-8. As an indication of this supposed motive, Rockwell alleges that CDII and Klein chose not to sue other investors over "virtually identical" agreements because those investors, unlike Rockwell, were willing to continue funding CDII.
Courts in this jurisdiction have tended to take a restrictive view of abuse of process claims given their potential to limit "unfettered access to the courts" and to cause a "chilling and inhibitory effect on would-be litigants of justiciable issues." Bannum, Inc. v. Citizens for a Safe Ward Five, Inc.,
Rockwell fails to adequately plead this second element of an abuse of process claim. The only affirmative acts that Rockwell alleges Klein and CDII took are initiating the suit in the first place and then filing "baseless" motions whose aim was to drive up Rockwell's litigation costs. That is not enough. The filing of the lawsuit is insufficient because under D.C. law "mere issuance of [ ] process is not actionable, no matter what ulterior motive may have prompted it; the gist of the action like in the improper use after issuance." Morowitz,
Rockwell's abuse of process claim also fails for a different reason. Under D.C. law, a plaintiff "must demonstrate not only ulterior motive, but success in achieving illegitimate ends with resulting injury." Yellow Bus Lines, Inc. v. Drivers, Chauffeurs & Helpers Local Union,
B. Malicious Prosecution
Moving to Rockwell's malicious prosecution claim, the company contends that CDII and Klein acted with "malice" and without probable cause in bringing suit against Rockwell knowing that their "factual and legal allegations were unsupported." Opp'n at 12. Rockwell argues that it "suffered special injury in the form of lost business and harm to its reputation" as a result of the 2016 suit. Id. at 13.
To establish a claim of malicious prosecution in the District of Columbia, a plaintiff must plead: "(1) that the underlying suit terminated in plaintiff's favor; (2) malice on the part of the defendant; (3) lack of probable cause for the underlying suit; and (4) special injury occasioned by the plaintiff as a result of the original *57action." Morowitz,
Rockwell's sole asserted "special injury" is "lost business and harm to its reputation." Opp'n at 13; 2017 Compl. ¶¶ 104-05. But because injury to reputation and loss of income do not constitute a "special injury," Rockwell's complaint fails to state a claim for malicious prosecution.
IV. Conclusion
For the foregoing reasons, it is hereby
ORDERED that [15] Defendants' Motion for Judgment on the Pleadings is GRANTED. It is further
ORDERED that the remaining claims are stayed pursuant to
SO ORDERED .
Because the Court finds that Rockwell did not sufficiently allege its abuse of process and malicious prosecution claims, it will dismiss them against both Mr. Klein and CDII. See, e.g., Dennis v. A.H. Robins Co.,
Indeed, one of the motions about which Rockwell complains sought to voluntarily dismiss one of CDII's claims. Case No. 16-cv-394, March 7, 2016 Notice of Voluntary Dismissal (ECF No. 8). And another-to file a restated opposition brief-was granted by the Court. Case No. 16-cv-394, April 24, 2017 Minute Order. In any case, the Court views Federal Rule of Civil Procedure 11 as the proper vehicle for sanctioning frivolous filings intrinsic to a lawsuit; not retaliatory abuse of process actions.
In Whelan v. Abell, the D.C. Circuit found that the abuse of process claim under D.C. law does not require that the defendant "fully achieve[ ] his ulterior goal."
To the extent that Whelan and Yellow Bus Lines are distinguishable on their facts, the Court finds the facts of this case to be more akin to those of Yellow Bus Lines. Whelan involved a lawsuit that the district court judge described as "nothing more than a desperate attempt by disappointed investors to create a cause of action where none exists."
Reference
- Full Case Name
- ROCKWELL CAPITAL PARTNERS, INC., and Samuel Oshana v. CD INTERNATIONAL ENTERPRISES, INC., and Henry L. Klein
- Cited By
- 6 cases
- Status
- Published