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Atmosphere Hospitality Management, LLC v. Curtullo

United States District Court, D. South Dakota, Western Division

February 20, 2014

ATMOSPHERE HOSPITALITY MANAGEMENT, LLC, Plaintiff,
v.
ZELIJKA CURTULLO, Defendant, and SHIBA INVESTMENTS, INC., KARIM MERALI, and Defendants and Third-Party Plaintiffs,
v.
JAMES HENDERSON, Third-Party Defendant.

ORDER GRANTING THIRD-PARTY DEFENDANT'S MOTION TO DISMISS RICO CLAIM, DENYING PLAINTIFF'S MOTION TO DISMISS THE RICO COUNTERCLAIMS, AND DENYING PLAINTIFF'S MOTION FOR ATTORNEYS' FEES

KAREN E. SCHREIER, District Judge.

Third-party plaintiffs, Shiba Investments, Inc. and Karim Merali, brought claims against third-party defendant, James Henderson, alleging violations of the Racketeer Influenced and Corrupt Organizations (RICO) Act, breach of contract, conversion, and tortious interference with a business expectancy. Henderson moved to dismiss the claim alleging RICO violations pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6) on August 21, 2013. Shiba and Merali have not responded. For the following reasons, Henderson's motion is granted.

Also pending before the court is plaintiff, Atmosphere Hospitality Management, LLC's, motion to dismiss Shiba and Merali's RICO counterclaims. Docket 16. After Atmosphere filed its motion to dismiss the counterclaims, Atmosphere amended its complaint, and Shiba and Merali amended their answers. Shiba and Merali no longer assert RICO counterclaims against Atmosphere. Therefore, Atmosphere's motion is denied as moot.

Atmosphere is also seeking attorneys' fees and expenses associated with its motion for preliminary injunction. Shiba and Merali contend that Atmosphere is not entitled to attorneys' fees for a myriad of reasons. Because D.S.D. LR 54.1C requires a party to move for fees 28 days "after the entry of judgment"[1] and judgment has not been entered, the court finds this motion to be premature and denies the motion.

BACKGROUND

The facts, according to the third-party complaint, are as follows:

Atmosphere Hospitality Management, LLC is a Delaware limited liability company. Atmosphere Hospitality Management Services, LLC, (AHMS)-a nonparty to this litigation-is purportedly a Delaware limited liability company. Henderson is a managing member and employee of Atmosphere and AHMS.

Shiba is a Texas corporation with its principal place of business in South Dakota. Merali is a resident of South Dakota.[2]

Atmosphere and Shiba entered into a licencing agreement involving a hotel that Shiba owns in Rapid City, South Dakota. AHMS and Shiba entered into a property management agreement involving the same hotel. Under the agreement, Henderson was responsible for managing the hotel property.

Due to the confusing nature of the third-party complaint, the court will quote the remaining relevant factual assertions:

Henderson and AHMS failed to manage the property consistent with similar facilities by failing to properly account to the owners for funds generated by the facility or the use of the same, including use of those funds to: 1) pay unauthorized salaries; 2) commingle or otherwise place Hotel funds into accounts not approved, authorized or accessible to owner via interstate, intrastate, wire and mail transfer; 3) pay personal expenses of Henderson; or 4) otherwise misappropriate Hotel funds. Docket 8 at ¶ 42.
Henderson and AHMS breached the contract and their fiduciary duties to Shiba and Merali, on multiple occasions, by paying via interstate, intrastate, wire and mail transfers, from the income of the Hotel, overhead or compensation of Atmosphere personnel, other than employees working at the Rapid City location. Id. at ¶ 44.
Henderson and AHMS breached the contract and their fiduciary duties to Shiba and Merali, on multiple occasions, by failing to maintain records and books of accounts for the Property in accordance with the most-recent version of the Uniform System of Accounts for the Lodging Industry, Tenth Revised Edition. Id. at ¶ 46.

Henderson and AHMS breached the contract and their fiduciary duties to Shiba and Merali, on multiple occasions, it is believed, by failing to obtain Owner's written consent on payments or transfers to vendors in excess of $50, 000 per year. These payments were ...


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