Boulton v. American Transfer Services, Inc. et al, No. 3:2014cv00175 - Document 34 (S.D. Cal. 2014)
Court Description: ORDER Granting In Part and Denying In Part 26 Plaintiff's Motion for Leave to File a Second Amended Complaint; Denying as Moot 29 Motion to Dismiss for Failure to State a Claim. Plaintiff shall file a second amended complaint within seven days. The hearing set for August 8, 2014 is Vacated. Signed by Judge Gonzalo P. Curiel on 8/5/2014. (srm)
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Boulton v. American Transfer Services, Inc. et al Doc. 34 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 KERRY BOULTON 11 12 CASE NO. 14cv00175-GPC-RBB Plaintiff, vs. 13 14 15 16 17 18 AMERICAN TRANSFER SERVICES, INC., U.S. TAX LIEN ASSOCIATION, STEVE CLEMENTS, TONY MARTINEZ, SAEN HIGGINS, SPIKE HUMER, RICHARD MEDINA, JR., ANA GUERRA DURAN, RUBEN SANCHEZ, ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S MOTION FOR LEAVE TO FILE A SECOND AMENDED COMPLAINT [Dkt. Nos. 26, 29.] Defendant. 19 20 21 22 23 24 25 26 27 28 INTRODUCTION Before the Court is Plaintiff Kerry Boulton’s (“Plaintiff”) Motion for Leave to File a Second Amended Complaint pursuant to Federal of Civil Procedure (“Rule”) 15(a). (Dkt. No. 26.) Plaintiff seeks to add a civil RICO cause of action and to add additional Plaintiffs. (Dkt. No. 26.) Defendants Ruben Sanchez and American Transfer Services, Inc.(“ATS”) also filed a motion to dismiss the first amended complaint. (Dkt. No. 29.) The motion is submitted on the papers without oral argument pursuant to Civil Local Rule 7.1(d)(1). Based on the reasoning below, the Court GRANTS in part and DENIES in part Plaintiff’s motion for leave to file a -1- 14cv00175-GPC-RBB Dockets.Justia.com 1 second amended complaint. Additionally, the Court DENIES Defendants Sanchez and 2 ATS’s Motion to Dismiss for Failure to State a Claim as moot. 3 4 FACTUAL BACKGROUND Plaintiff is a resident of Melbourne, Australia. (Dkt. No. 17, FAC ¶ 7.) In the 5 first amended complaint Plaintiff alleges Defendants ATS and Sanchez, as an employee 6 of ATS, fraudulently induced Plaintiff to purchase tax liens and/or tax deeds in the 7 United States. (Id. ¶ .) Defendant ATS purports to be a company “that will open up 8 a business for foreign citizens to acquire interests in real estate related to tax liens 9 and/or tax deeds for profit” by providing Sole Proprietorship Registration, U.S. 10 Employer Identification number, U.S. Banking Facilitation and a U.S. mailing address. 11 (Id. ¶¶ 12, 13.) Defendants receive funds from foreigners to “open and (sic) account” 12 and then takes controls of the funds. (Id. ¶ 15.) Defendants claim they will arrange 13 for transfers between appropriate bank accounts to pay ATS its fees and for Plaintiff 14 to have funds available to make investments in U.S. tax liens and tax deeds. (Id.) ATS 15 asks for money to be wired to an ATS account and then ATS will set up sub-accounts 16 for the clients to transfer money into in order to make the investments. (Id. ¶ 16.) 17 These representations were made to Plaintiff. (Id. ¶ 14.) 18 Plaintiff provided the total of $156,000 to Defendants in two installments of 19 $1,000 and $155,000. (Id. ¶ 19.) Defendants assumed control of the funds and never 20 transferred them to the purported “sub account” which would have been made available 21 to her to exercise the proper control. (Id. ¶ 20.) She has made numerous demands for 22 the return of her funds which have failed. (Id. ¶ 21.) Plaintiff alleges causes of action 23 for breach of contract, conversion and money had and received. 24 25 PROCEDURAL BACKGROUND On January 24, 2014, Plaintiff filed a complaint against Defendants ATS, Steve 26 Clements, Ana Guerra Duran, Saen Higgins, Spike Humer, Tony Martinez, Richard 27 Medina, Jr., Ruben Sanchez, and U.S. Tax Lien Association for (1) money had and 28 received, (2) conspiracy through conversion, (3) breach of contract, (4) fraud, and (5) -2- 14cv00175-GPC-RBB 1 fraud–promise without intent to perform. (Dkt. No. 1.) On March 4, 2014, Defendant 2 Richard Medina, Jr. filed a Motion to Dismiss for Failure to State a Claim. (Dkt. No. 3 14.) On the same date, Defendants Ana Guerra Duran and Ruben Sanchez filed a 4 Motion to Dismiss for Failure to State a Claim. 5 On March 25, 2014, Plaintiff filed a first amended complaint (“FAC”) against 6 Defendants ATS and Ruben Sanchez. (Dkt. NO. 17.) On April 28, 2014, the Court 7 denied Defendants Ruben Sanchez and Anna Guerra Duran’s motion to dismiss the 8 original complaint as moot. (Dkt. No. 23.) On May 2, 2014, Plaintiff filed a Notice 9 of Voluntary Dismissal as to Defendant Ana Guerra Duran. (Dkt. No. 24.) 10 On June 10, 2014, Plaintiff filed a Motion for Leave to File Amended Complaint 11 to Add a Claim for Civil RICO and Additional Plaintiffs. (Dkt. No. 26.) On June 27, 12 2014, Defendants Ruben Sanchez and ATS filed an opposition. (Dkt. No. 28.) On July 13 11, 2014, Plaintiff filed a Reply. (Dkt. No. 31.) 14 On July 1, 2014, Defendants Ruben Sanchez and ATS filed a Motion to Dismiss 15 for Failure to State a Claim. (Dkt. No. 29.) On July 15, 2014, Plaintiff filed an 16 opposition. (Dkt. No. 32.) On July 22, 2014, Defendant filed a reply. (Dkt. No. 33.) 17 DISCUSSION 18 I. Federal Rule of Civil Procedure 7(b) 19 As an initial argument, Defendants argue that the Court should deny Plaintiff’s 20 motion for leave to file a second amended complaint by failing to meet the particularity 21 requirements of Rule 7(b) because Plaintiff failed to attach the proposed amended 22 complaint to her motion. Plaintiff opposes contending that neither the Federal Rules 23 nor the Local Civil Rules require that a proposed amendment be attached to a motion 24 for leave to amend a complaint. 25 Rule 7(b) of the Federal Rules of Civil Procedure provides that a motion must 26 “state with particularity the grounds for seeking the order; and state the relief sought.” 27 Fed. R. Civ. P. 7(b). 28 Defendants cite to other circuits to support their argument that a proposed -3- 14cv00175-GPC-RBB 1 pleading must be attached with a motion for leave to amend a complaint. However, 2 these circuits also hold that a supporting brief that contains the basis of a proposed 3 amendment could be sufficient to grant a motion for leave to amend a complaint. See 4 Wolgin v. Simon, 722 F.2d 389, 396 (8th Cir. 1983) (appellant did not submit a 5 proposed amendment and in its brief, did not indicate what an amended complaint 6 would have contained); United States ex rel. Doe v. Dow Chem. Co., 343 F.3d 325, 7 330-31 (5th Cir. 2003) (“absence of any proposed amendments, compounded by lack 8 of grounds for such an amendment” justifies denial of the motion to amend the 9 complaint). Where a local rule requires that a party seeking leave to amend attach a 10 proposed pleading, the Ninth Circuit has held that district courts do not abuse their 11 discretion by denying leave to amend based on the party’s failure to attach a proposed 12 amended complaint. Gardner v. Martino, 563 F.3d 981, 991 (9th Cir. 2009); Waters 13 v. Weyerhaeuser Mortg. Co., 582 F.2d 503, 507 (9th Cir. 1978). 14 However, in this district, the Local Rules for the Southern District of California 15 do not require a party to file a proposed pleading when seeking leave to amend a 16 complaint. See Stone v. Advance America, No. 08cv1549-WQH(WMc), 2009 WL 17 2242350, at *2 (S.D. Cal. July 24, 2009) (failure to attach a proposed amendment was 18 not fatal because Plaintiff’s substantive claims would remain by the addition of two 19 proposed class representatives). Based on the caselaw, even if no proposed amended 20 pleading is attached to a motion for leave to amend, it appears that if the brief 21 supporting a motion for leave to amend the complaint, itself, provides the facts and 22 legal theories to support grounds for an amended complaint, the failure to attach a 23 proposed amended complaint is not critical. See Gardner, 563 F.3d at 991 (appellant 24 failed to include a proposed copy of the amended complaint and the court noted that 25 appellants did not propose any new facts or legal theories for an amended complaint 26 and gave the Court no basis to allow an amendment). 27 In her briefing, Plaintiff seeks to add civil RICO as another cause of action and 28 provides a sufficient factual basis to bring such a claim. To state a claim for civil -4- 14cv00175-GPC-RBB 1 RICO, a plaintiff must allege “(1) conduct (2) of an enterprise (3) through a pattern (4) 2 of racketeering activity.” Odom v. Microsoft Corp., 486 F.3d 541, 547-48 (9th Cir. 3 2007). Elements of federal wire fraud are 1) a scheme to defraud; 2) use of the wires 4 in furtherance of the scheme and 3) the specific intent to defraud. U.S. v. McNeil, 320 5 F.3d 1034, (9th Cir. 2003). Plaintiff asserts that Defendants solicited individuals 6 abroad to conduct business with them with the intent to defraud. (Dkt. No. 31 at 4.) 7 Plaintiff alleges the funds were transferred via money wire. (Id.) Furthermore, 8 Plaintiff alleges that Defendant’s engaged in pattern racketeering activity, by reaching 9 out to several individuals. (Dkt. No. 26 at 6.) Therefore, the Court finds that Plaintiff 10 has provided sufficient particularity of the grounds it seeks to amend under Rule 7(b).1 11 II. Federal Rule of Civil Procedure 15 12 Under Federal Rule of Civil Procedure (“Rule”) 15(a), leave to amend a 13 complaint after a responsive pleading has been filed may be allowed by leave of the 14 court and “shall freely be given when justice so requires.” Foman v. Davis, 15 371 U.S. 178, 182 (1962); Fed. R. Civ. P. 15(a). Granting leave to amend rests in the 16 sound discretion of the trial court. Internat’l Ass’n of Machinists & Aerospace 17 Workers v. Republic Airlines, 761 F.2d 1386, 1390 (9th Cir. 1985). This discretion 18 must be guided by the strong federal policy favoring the disposition of cases on the 19 merits and permitting amendments with “extreme liberality.” DCD Programs Ltd. v. 20 Leighton, 833 F.2d 183, 186 (9th Cir. 1987). “This liberality in granting leave to 21 amend is not dependent on whether the amendment will add causes of action or 22 parties.” Id.; but see Union Pacific R.R. Co. v. Nevada Power Co., 950 F.2d 1429, 23 1432 (9th Cir. 1991) (In practice, however, courts more freely grant plaintiffs leave to 24 amend pleadings in order to add claims than new parties). 25 26 1 Courts ordinarily do not consider the validity of a proposed amended pleading in deciding whether to grant leave to amend and defer consideration of challenges to 27 the merits of a proposed amendment until after leave to amend is granted and the amended pleadings are filed. Netbula, LLC v. Distinct Corp., 212 F.R.D. 534, 539 28 (N.D. Cal. 2003) (citation omitted). -5- 14cv00175-GPC-RBB 1 Because Rule15(a) favors a liberal policy, the nonmoving party bears the burden 2 of demonstrating why leave to amend should not be granted. Genentech, Inc. v. Abbott 3 Labs., 127 F.R.D. 529, 530-31 (N.D. Cal. 1989). In assessing the propriety of an 4 amendment, courts consider several factors: (1) undue delay, (2) bad faith or dilatory 5 motive; (3) repeated failure to cure deficiencies by amendments previously permitted; 6 (4) prejudice to the opposing party; and (5) futility of amendment. Foman, 371 U.S. at 7 182; United States v. Corinthian Colleges, 655 F.3d 984, 995 (9th Cir. 2011). These 8 factors are not equally weighted; the possibility of delay alone, for instance, cannot 9 justify denial of leave to amend, DCD Programs, 833 F.2d at 186, but when combined 10 with a showing of prejudice, bad faith, or futility of amendment, leave to amend will 11 likely be denied. Bowles v. Reade, 198 F.2d 752, 758 (9th Cir. 1999). The single most 12 important factor is whether prejudice would result to the non-movant as a consequence 13 of the amendment. William Inglis & Sons Baking Co. v. ITT Continental Baking Co., 14 668 F.2d 1014, 1053 (9th Cir. 1981). 15 Defendants do not assert that granting Plaintiff leave to file a second amendment 16 complaint to add a civil RICO claim would be futile, sought in bad faith, would create 17 undue delay or othewise prejudice Defendants. Accordingly, the Court GRANTS 18 Plaintiff’s motion for leave to file a second amended complaint to add civil RICO as 19 a cause of action.2 20 B. Permissive Joinder 21 Plaintiff also seeks to join additional plaintiffs pursuant to Rule 20(a)(1)3, based 22 on newly discovered evidence. Defendant argues that permissive joinder is 23 inappropriate. 24 2 The Court notes that Defendants only argue they will be prejudiced if the Court were to allow the addition of two additional parties who live abroad as the cost of 26 discovery would increase exponentially. Since the Court DENIES Plaintiff’s motion to add additional plaintiffs, Defendants’ argument is moot. 27 3 The additional named plaintiffs are Ane Marie Lacy and Mark Carmelle 28 Chornohus. 25 -6- 14cv00175-GPC-RBB 1 Under Rule 20(a)(2), permissive joinder of defendants is proper if: “(A) any 2 right to relief is asserted against them jointly, severally, or in the alternative with 3 respect to or arising out of the same transaction, occurrence, or series of transactions 4 or occurrences; and (B) any question of law or fact common to all defendants will arise 5 in the action.” Fed. R. Civ. P. 20(a)(2). Rule 20(a)(2) is to be construed liberally to 6 promote judicial economy and trial convenience. League to Save Lake Tahoe v. Tahoe 7 Regional Planning Agency, 558 F.2d 914, 917 (9th Cir. 1977) (citing Mosley v. Gen. 8 Motors, 497 F.2d 1330, 1332-33 (8th Cir. 1974)). “The ‘same transaction’ requirement 9 of Rule 20 refers to ‘similarity in the factual background of a claim; claims that arise 10 out of a systematic pattern of events’ and have a ‘very definite logical relationship.’” 11 Hubbard v. Hougland, No. 09-0939, 2010 WL 1416691, at *7 (E.D. Cal. Apr. 5, 2010) 12 (quoting Bautista v. Los Angeles County, 216 F.3d 837, 842-43 (9th Cir. 2000)). In 13 addition, “the mere fact that all [of a plaintiff’s] claims arise under the same general 14 law does not necessarily establish a common question of law or fact.” Coughlin v. 15 Rogers, 130 F.3d 1348, 1351 (9th Cir. 1997). 16 However, “even once [the Rule 20(a)] requirements are met, a district court must 17 examine whether permissive joinder would ‘comport with the principles of 18 fundamental fairness’ or would result in prejudice to either side.” Coleman v. Quaker 19 Oats Company, 232 F.3d 1271, 1296 (9th Cir. 2000) (citing Desert Empire Bank v. 20 Insurance Co. of North America, 623 F.2d 1371, 1375 (9th Cir. 1980). 21 Here, Plaintiff seeks to add additional plaintiffs as they are victims to 22 Defendants’ fraudulent scheme. Besides stating that these additional plaintiffs are 23 victims, Plaintiff has failed to demonstrate that these additional plaintiffs seek relief 24 arising out of the same transaction and occurrence and that the same question of law 25 or fact is common to all plaintiffs. In fact, Plaintiff provides no facts to demonstrate 26 permissive joinder. As such, Plaintiff has failed to prove a definite logical relationship 27 between the claims of the additionally named plaintiffs and Plaintiff’s claim. 28 Accordingly, the Court DENIES Plaintiff’s motion for leave to add two additional -7- 14cv00175-GPC-RBB 1 Plaintiffs. 2 3 CONCLUSION For the above stated reasons, the Court GRANTS Plaintiff’s Motion for Leave 4 to File a Second Amended Complaint to add a claim for Civil RICO. The Court 5 DENIES Plaintiff’s Motion for Leave to File a Second Amended Complaint to add 6 additional plaintiffs. Plaintiff shall file a second amended complaint within seven days 7 of the “Filed” date of the Order. Since Plaintiff will be filing a second amended 8 complaint, the Court DENIES Defendants’ motion to dismiss the first amended 9 complaint as moot. The hearing set for August 8, 2014 shall be vacated. 10 IT IS SO ORDERED. 11 12 DATED: August 5, 2014 13 14 HON. GONZALO P. CURIEL United States District Judge 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -8- 14cv00175-GPC-RBB
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