Avant-Garde LLC v. Mountain Spa Properties, LLC et al

Filing 137

ORDER: Defendant Rebecca Mendenhall's #127 motion to dismiss is DENIED. See order for complete details. Signed by Judge Neil V Wake on 10/25/11. (NKS)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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No. CV 10-01499-PHX-NVW

Avant-Garde, LLC,
Plaintiff,

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vs.

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ORDER

Mountain Spa Properties, LLC, et al.,

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Defendants.

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Before the Court is Defendant Rebecca Mendenhall’s motion to dismiss (Doc.
127). The motion will be denied.

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Mendenhall presents two arguments for dismissal. First, she attaches various

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documents, e-mails, and so forth that supposedly show she is not liable for the conduct

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alleged. This material is outside the scope of Avant-Garde’s complaint. Some of it may

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be subject to judicial notice as public records, see Lee v. City of Los Angeles, 250 F.3d

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668, 688–89 (9th Cir. 2001), but even so, Mendenhall does no more than present her side

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of the story. Avant-Garde presents a different story. At this stage of the case, the Court

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has no power to resolve conflicting accounts, but instead must accept all of the plaintiff’s

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plausible factual allegations as true and construe the pleadings in a light most favorable to

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the plaintiff. Knievel v. ESPN, 393 F.3d 1068, 1072 (9th Cir. 2005). Mendenhall’s first

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argument therefore fails.

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Mendenhall’s second argument is that Avant-Garde’s complaint does not state a

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claim with the specificity required by the Private Securities Litigation Reform Act

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(PSLRA). However, Mendenhall answered the complaint over a year ago (Doc. 8) and

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the parties are well into the discovery phase (see Docs. 102, 105, 108, 111, 113, 114, 121,

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128).

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No authority answers whether a party must raise a PSLRA pleading-specificity

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objection at the outset. However, it is well settled that a party waives any objection to

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Fed. R. Civ. P. 9(b)’s special fraud pleading requirements if not raised at the outset.

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Davsko v. Golden Harvest Prods., Inc., 965 F. Supp. 1467, 1474 (D. Kan. 1997); Todaro

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v. Orbit Int’l Travel, Ltd., 755 F. Supp. 1229, 1234 (S.D.N.Y. 1991); United Nat’l

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Records, Inc. v. MCA, Inc., 609 F. Supp. 33, 39 (N.D. Ill. 1984). Although the PSLRA

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standards are more strict than Rule 9(b)’s, there is no basis in logic or sound

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administration to treat the PSLRA differently with respect to waiver. The point of the

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PSLRA pleading requirements is to screen cases early for “nuisance filings.” Merrill

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Lynch, Pierce, Fenner & Smith Inc. v. Dabit, 547 U.S. 71, 81 (2006). A securities fraud

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defendant may not therefore answer the complaint and go forward with discovery, all the

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while holding a pleading objection in reserve in case the going gets rough. Such late-

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game procedural dismissals are precisely what the Federal Rules are meant to avoid.

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Accordingly, Mendenhall’s PSLRA argument fails.

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IT IS THEREFORE ORDERED that Defendant Rebecca Mendenhall’s motion to
dismiss (Doc. 127) is DENIED.
Dated this 25th day of October, 2011.

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