United States District Court, D. South Dakota, Southern Division
LARSON MANUFACTURING COMPANY OF SOUTH DAKOTA, INC., SUPERIOR HOMES, LLC, Plaintiffs,
WESTERN SHOW HOMES, INC., AMERICAN MODULAR HOUSING GROUP, LLC, AMERICAN MODULAR HOUSING GROUP, INC., PAUL THOMAS, Defendants.
ORDER DENYING DEFENDANTS' MOTION TO QUASH DOCKET
VERONICA L. DUFFY, UNITED STATES MAGISTRATE JUDGE.
matter is before the court on the basis of diversity
jurisdiction, 28 U.S.C. § 1332, after defendants removed
the matter from South Dakota state court. See Docket
No. 1, 1-1. The parties have consented to this magistrate
judge handling their case pursuant to 28 U.S.C. §
636(c). Now pending is defendants' motion to quash a
subpoena served on U.S. Bank by plaintiffs. See
Docket No. 28. Plaintiffs oppose the motion. See
Docket No. 34.
Background Facts and Claims
court states the following facts from plaintiffs' amended
complaint in order to evaluate defendants' pending
motion. Plaintiff Larson Manufacturing Company of South
Dakota, Inc. (Larson) is the parent company of plaintiff
Superior Homes, LLC (Superior). See Docket No. 1-6
at 4. Both are South Dakota business entities. Id.
Superior is in the business of manufacturing and selling
modular homes. Id.
Western Showcase Homes, Inc. ("Western") is a
Nevada corporation in the business of purchasing, reselling,
and financing modular homes. Id. at 5. Defendant
Paul Thomas, a Nevada resident, is the sole member of
American Modular Housing Group, LLC (AMHG, LLC), a Nevada
company in the business of buying and reselling modular
homes. Id. American Modular Housing Group, Inc.
(AMHG, Inc.), is a Canadian corporation with its principal
place of business in Nevada that also buys and resells
modular homes. Id. Thomas is the principal agent and
owner of both AMHG entities. Id.
defendant entities purchased modular homes from Superior and
then re-sold those homes to customers, sometimes arranging
for delivery, set and completion of the home at the
customer's location. Id. Larson and Superior
extended credit to the defendant entities for these
purchases; AMHG would then repay the loans when its customer
paid the defendant entities. Id. at 6.
complaint recites that defendant entities placed orders for
26 modular homes with plaintiffs. Plaintiffs constructed the
homes. Of the homes that were delivered to defendants, full
payment was never made even though the complaint alleges the
ultimate customers who received these homes paid defendants.
Other modular homes ordered by defendants were custom-built
and never delivered because defendants never paid for the
homes. As to the homes plaintiffs retain possession of,
plaintiffs allege the custom nature of the homes makes resale
of the homes at a reasonable value impracticable.
addition, Larson entered into a loan agreement with Western
which was guaranteed by AMHG, Inc. This loan agreement
ultimately encompassed $14 million in funds. Larson alleges
that Western defaulted on the loan and AMHG, Inc. refused to
pay pursuant to its guarantee. For all these matters,
plaintiffs assert eight counts of breach of contract, five
counts of unjust enrichment, two counts of tortious
interference with business expectancy, three counts of fraud,
two counts of conversion, one count each of debt and
guarantee, and one count of piercing the corporate veil. In
particular, plaintiffs allege defendant Thomas converted
money received from third parties intended for plaintiffs to
his own personal use. See Docket No. 1-6 at p. 4,
¶ 29; p. 7, ¶ 57; p. 10, ¶ 91; p. 15, ¶
141; p. 17, ¶ 159; and p. 20, ¶¶ 187-190.
generally deny nearly all of plaintiffs' allegations in
their amended complaint. See Docket No. 6 at 1-16.
In addition, defendants assert five counterclaims against
Larson and Superior. Id. at 17-27. Those
counterclaims include breach of contract (failure to pay
rebates, failure to pay personal loans from Thomas); unjust
enrichment (rebates, warranty and service fees); tortious
interference with business expectancy (Aspen Links Country
Club, Aspen Village Properties, and Waugh Who Developments);
breach of contract (manufacturing defects in modular homes);
and fraud and deceit (fraudulent inducement to sign a
mortgage in connection with Aspen Village and McKenzie Lane,
assignment of mortgage interest in Moose Ridge). See
Docket No. 6 at pp. 17-27. Defendants seek compensatory and
punitive damages on their counterclaims, pre- and
post-judgment interest, attorney's fees, and other
remedies. Id. at 27.
dates of the business transactions alleged by plaintiffs in
their amended complaint go back as far as July, 2011, and
extend into the year 2016. See Docket No. 1-6.
Subpoena Duces Tecum and Motion to Quash
On June 15, 2017, plaintiffs' counsel served non-party
U.S. Bank with a subpoena duces tecum ...