Thanh Tam Nguyen and MDA LLC v. Clarence William Ramsey

Background

Plaintiffs Thanh Tam Nguyen ("Tam") and MDA LLC purchased Mill City Anesthesia, a business providing on-site dental anesthesia services, from defendants Clarence William Ramsey III and Shyrock MCA Holding, LLC (together, "Shyrock Defendants") on February 21, 2025, for $850,000. To finance the purchase, MDA obtained a $734,000 loan from First Bank of the Lake, guaranteed by the U.S. Small Business Administration ("SBA Loan"). In addition, MDA executed an $85,000 promissory note (the "Buyer Note") in favor of Mill City or its successors and assigns. Tam personally guaranteed the Buyer Note.

The Buyer Note includes a standby clause providing that interest accrues for the first two years but no payments are required during that period. Repayment of the Buyer Note is also subordinate to the SBA Loan pursuant to a Debt and Lien Subordination Agreement ("Subordination Agreement"). The Subordination Agreement expressly prohibits any payments on the Buyer Note for the first two years of the SBA Loan's term, with the earliest possible payment date being March 1, 2027. Even after that date, payments are only permitted if two conditions precedent are satisfied: (1) MDA is not in default under the SBA Loan, and (2) MDA has achieved a debt service coverage ratio (a financial metric measuring ability to cover debt obligations) of at least 1.25x for two consecutive full fiscal years.

Procedural History

Plaintiffs filed suit on April 28, 2025, asserting claims including violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), wire fraud, fraudulent misrepresentation, negligent misrepresentation, and breach of contract. After the court ruled on a prior motion to dismiss, the Shyrock Defendants answered and Shyrock initially asserted a counterclaim for breach of contract related to the Buyer Note. On February 5, 2026, Shyrock withdrew that breach of contract counterclaim and filed an amended counterclaim seeking a declaratory judgment (a court declaration of the parties' legal rights) under 28 U.S.C. § 2201. Specifically, Shyrock sought declarations that: (a) the Buyer Note and guaranty are valid and binding; (b) no amount is currently due unless and until the SBA Loan is satisfied; and (c) upon satisfaction of the SBA Loan, plaintiffs are obligated to pay $85,000 plus interest and fees.

Plaintiffs moved to dismiss the amended counterclaim under Federal Rule of Civil Procedure 12(b)(6) (failure to state a claim) and Rule 12(b)(7) (failure to join a required party—specifically, First Bank of the Lake).

The Court's Analysis

Recharacterizing the Motion

Although plaintiffs styled their motion under Rules 12(b)(6) and 12(b)(7), Judge Tunheim found that the primary challenge was to the court's subject-matter jurisdiction (its legal authority to hear the case at all). The court therefore construed the motion as one brought under Rule 12(b)(1), which governs dismissal for lack of subject-matter jurisdiction. The party seeking to invoke federal court jurisdiction bears the burden of demonstrating it exists.

Ripeness Doctrine Applied to Declaratory Judgment

The Declaratory Judgment Act allows a court to declare the rights of parties in "a case of actual controversy." This phrase refers to the Article III (constitutional) requirement that federal courts may only hear real, live disputes—not hypothetical or future ones. In declaratory judgment actions, this means there must be a substantial controversy between parties with adverse legal interests, of sufficient immediacy and reality to warrant a declaration.

The ripeness doctrine (which concerns whether a dispute is sufficiently developed for court resolution) applies to declaratory judgment actions. Courts assess ripeness by weighing: (1) the fitness of the issues for judicial decision, and (2) the hardship to the parties of withholding court consideration. A claim is not ripe if it rests on contingent future events that may not occur as anticipated, or may not occur at all.

Why the Counterclaim Is Not Ripe

Judge Tunheim identified two independent reasons the counterclaim is not ripe.

First, the Subordination Agreement expressly prohibits any payments on the Buyer Note before March 1, 2027. No payment obligation can arise before that date.

Second—and more fundamentally—March 1, 2027, is not itself a payment date; it is merely the earliest date on which payment could potentially begin. Even after that date, payment depends on two additional conditions precedent that have not been met and whose fulfillment is entirely speculative: MDA must not be in default on the SBA Loan, and MDA must have achieved the required debt service coverage ratio for two consecutive fiscal years. There is no basis in the record to determine when or whether those conditions will ever be satisfied. Because MDA's payment obligation is wholly contingent on future events that may never occur, any declaration would amount to an impermissible advisory opinion—a ruling on a hypothetical rather than a real dispute. The Supreme Court has long held that the declaratory judgment procedure may not be used to secure advisory opinions in controversies that have not yet arisen.

Shyrock's Rule 13(a) Argument Rejected

Shyrock argued it was required to bring the counterclaim now under Federal Rule of Civil Procedure 13(a), which requires a party to assert certain "compulsory" counterclaims—those arising out of the same transaction or occurrence as the opposing party's claim. The court rejected this argument. Even if the counterclaim qualifies as compulsory under Rule 13(a), subject-matter jurisdiction must still exist before the court can consider it. Federal procedural rules, including Rule 13(a), do not and cannot expand Article III's case-or-controversy requirement. Rule 82 of the Federal Rules of Civil Procedure expressly provides that the rules do not extend or limit the jurisdiction of district courts.

Dismissal Without Prejudice

Because the dismissal is for lack of subject-matter jurisdiction rather than on the merits, the court dismissed the counterclaim without prejudice. Under Eighth Circuit precedent, a court is generally barred from dismissing a case with prejudice when subject-matter jurisdiction is absent. Accordingly, Shyrock retains the ability to refile if and when the conditions for payment under the Subordination Agreement are actually satisfied.

The court noted in a footnote that Shyrock alleged MDA failed to provide monthly financial statements and annual tax returns required under the Buyer Note, but declined to consider those allegations in the ripeness analysis because Shyrock did not seek separate relief for that alleged breach in its amended counterclaim. The court noted that plaintiffs represented MDA had produced the relevant documents, and stated that Shyrock may seek leave to amend its pleading to assert a separate claim based on those allegations if it chooses to do so.

Because the counterclaim was dismissed on ripeness grounds, the court declined to address whether First Bank of the Lake was a required party under Rule 19.

Disposition

Plaintiffs' Motion to Dismiss Amended Counterclaim (Docket No. 49) was granted in part. Shyrock's Amended Counterclaim (Count I: Declaratory Judgment) was dismissed without prejudice.