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Capital City Energy Group, Inc., et al. v. Kelley Drye & Warren Llp

October 31, 2011

CAPITAL CITY ENERGY GROUP, INC., ET AL. PLAINTIFFS,
v.
KELLEY DRYE & WARREN LLP, ET. AL. DEFENDANTS.



The opinion of the court was delivered by: Algenon L. Marbley United States District Court Judge

JUDGE ALGENON L. MARBLEY Magistrate Judge Norah McCann King

OPINION AND ORDER

I. INTRODUCTION

This diversity action*fn1 is before the Court on Defendants Kelley Drye & Warren, LLP, and Timothy Lavender's Motion to Dismiss Plaintiffs' Complaint. Kelley Drye & Warren, LLP and Timothy Lavender (collectively, "KDW") move to dismiss the Complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure on the ground that Plaintiffs Capital City Energy Group, Inc. ("CCEG") and its subsidiary Hotwell Services, Inc. are foreign corporations that are not licensed to do business in Ohio and thus lack the capacity to sue. For the reasons that follow, the Court DENIES KDW's motion.

II. BACKGROUND

KDW is a New York limited liability partnership with a national law practice. Plaintiffs retained KDW's Chicago, Illinois office to provide legal services. KDW and KDW partner, Timothy Lavender, represented Plaintiffs from approximately 2008 until 2010. During that time, KDW provided legal assistance to Plaintiffs in Ohio. Due to alleged business failures, including KDW's failure to license Plaintiffs in Ohio as a foreign corporation, Plaintiffs' relationship with KDW dissolved.

This is an action for legal malpractice. Plaintiffs commenced this action in state court on January 31, 2011, and KDW removed the case to this Court based on the Parties' complete diversity of citizenship. CCEG is a Nevada corporation with its principal place of business in Ohio. Hotwell is a Delaware corporation with its principal place of business in Pennsylvania.

It is undisputed that at the time Plaintiffs filed their Complaint, neither CCEG nor Hotwell had obtained a license to transact business in Ohio as a foreign corporation. It is also undisputed that Plaintiffs have since remedied the situation by acquiring all the appropriate licensure to transact business in Ohio. KDW moves for dismissal of this case arguing that Plaintiffs lacked the capacity to sue when this action was commenced and that lack of capacity to sue cannot be cured after a complaint is filed.

III. STANDARD OF REVIEW

Rule 12(b)(6) permits dismissal of a complaint for "failure to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). When considering a Rule 12(b)(6) motion to dismiss,a court must determine whether the complaint "contain[s] sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A court should construe the complaint in the light most favorable to the plaintiff and accept all well-pleaded material allegations in the complaint as true. Iqbal, 129 S.Ct. at 1949--50; Erickson v. Pardus, 551 U.S. 89, 93--94 (2007); Twombly, 550 U.S. at 555--56. Although liberal, the Rule 12(b)(6) standard requires more than the bare assertion of legal conclusions to survive a motion to dismiss. Twombly, 550 U.S. at 555--56; Allard v. Weitzman, 991 F.2d 1236, 1240 (6th Cir. 1993).

In federal courts, "a motion under Rule 12(b)(6) for failure to state a claim upon which relief can be granted may properly be utilized to assert a defense of lack of capacity to sue." Weiner v. Winters, 50 F.R.D. 306, 307-08 (S.D.N.Y. 1970) (citing 2A Moore's Federal Practice ¶12.07, note 13 at 2263 (2d ed. 1968); Klebanow v. New York Produce Exchange, 344 F.2d 294 (2d Cir. 1965)).

IV. LAW AND ANALYSIS

A. Diversity Jurisdiction

At issue in this case is whether a previously unlicensed corporation that became licensed after bringing an action in court can maintain that action. This matter is before the Court on diversity. "In diversity cases, the federal courts must apply state law 'in accordance with the then controlling decision of the highest state court.'" Ziegler v. IBP Hog Mkt., Inc., 249 F.3d 509, 517 (6th Cir. 2001) (quoting United States v. Anderson County, Tennessee, 761 F.2d 1169, 1173 (6th Cir. 1985)). This Court must therefore apply Ohio law. The Ohio Supreme Court, however, has not ruled on the issue before this Court. Where a state's highest court has not spoken on a precise issue, ...


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