Gazian et al v. Wells Fargo Bank NA et al

Filing 119

ORDER denying 108 Motion for Partial Summary Judgment; granting in part and denying in part 110 Motion for Summary Judgment; denying 118 Motion for oral argument. The Court will set a final pretrial conference by separate order. Signed by Judge David G Campbell on 9/18/2014.(DGC, nvo)

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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Ken Gazian, et al., 10 No. CV-13-01312-PHX-DGC Plaintiffs, 11 v. 12 ORDER Wells Fargo Bank NA, et al., 13 Defendants. 14 15 Defendant/Cross-Plaintiff Wells Fargo Bank NA has filed a motion for partial 16 summary judgment. Doc. 108. The motion is fully briefed. The Court will deny the 17 motion.1 18 Cross-Defendants Hubert Kelly and Kelly & Kelly, P.C. (the “Kelly Defendants”) 19 have also filed a motion for summary judgment. Doc. 110. The motion is fully briefed. 20 The Court will grant the motion in part and deny it in part. 21 I. Background. 22 Plaintiffs are Ken Gazian, Pierre Investments, Inc., and Aragadz Foods, Inc. d/b/a 23 Devanche Jewelers. Gazian is a Texas resident and both Pierre and Devanche are Texas 24 corporations, wholly owned by Gazian. Plaintiffs originally brought this action against 25 both Wells Fargo and the Kelly Defendants based on an allegedly fraudulent scheme 26 perpetrated by the Kelly Defendants. Plaintiffs allege that they transferred $80,000 to the 27 1 28 The request for oral argument is denied because the issues have been fully briefed and oral argument will not aid the Court’s decision. See Fed. R. Civ. P. 78(b); Partridge v. Reich, 141 F.3d 920, 926 (9th Cir. 1998). 1 Kelly Defendants’ Wells Fargo bank account for the “purchase of securities allegedly 2 posted on the London Stock Exchange.” 3 purportedly represented “as having a total value in excess of $45,000,000,” and Plaintiffs 4 were led to believe their investment “would yield a return of $280,000.” Id. Doc. 101, ¶ 10. The transaction was 5 Plaintiffs allege that they “sought assurance from Wells Fargo” that the Kelly 6 Defendants were legitimate business people and were in the process of putting together a 7 large securities transaction. Id. Wells Fargo employees from a branch in Mesa, Arizona 8 apparently represented to Plaintiffs “on multiple occasions that there was a transaction 9 being put together for the purchase of the securities, that funds were present for the 10 purchase of securities, and that Wells Fargo had undertaken numerous successful 11 transactions” with the Kelly Defendants. Id., ¶ 11. Plaintiffs claim that they entered into 12 an “Irrevocable Commitment” with the Kelly Defendants and Wells Fargo that set forth 13 the terms discussed above. Id., ¶ 12. 14 Plaintiffs assert that they were convinced by the Kelly Defendants in October 2011 15 to reinvest the $280,000 promised by the Irrevocable Commitment – rather than 16 withdrawing it as scheduled – to “fund a $5,000,000 loan to purchase and renovate the 17 Park Plaza Tower,” an office tower in Dallas. Id., ¶ 16. Plaintiffs also agreed to pay an 18 additional $50,000 to fund the transaction. Id. Plaintiffs assert that on November 29, 19 2011, when they attempted to transfer the funds guaranteed by the Irrevocable 20 Commitment to the Kelly Defendants, they “were informed by Wells Fargo that the 21 accounts had been emptied and that accordingly Wells Fargo would not transfer any 22 amount to Plaintiffs pursuant to the Irrevocable Commitment.” Id., ¶ 21. Neither the 23 Irrevocable Commitment nor the Park Plaza transaction was ever performed. 24 Plaintiffs reached a settlement with the Kelly Defendants in late 2013, and the 25 Court dismissed the Kelly Defendants on November 26, 2013. Doc. 58. Wells Fargo 26 filed an answer and a cross-claim for indemnity against the Kelly Defendants. Doc. 56. 27 The Court declined to dismiss Wells Fargo’s cross-claim. Doc. 73. 28 -2- 1 II. Legal Standard. 2 A party seeking summary judgment “bears the initial responsibility of informing 3 the district court of the basis for its motion, and identifying those portions of [the record] 4 which it believes demonstrate the absence of a genuine issue of material fact.” Celotex 5 Corp. v. Catrett, 477 U.S. 317, 323 (1986). Summary judgment is appropriate if the 6 evidence, viewed in the light most favorable to the nonmoving party, shows “that there is 7 no genuine dispute as to any material fact and the movant is entitled to judgment as a 8 matter of law.” Fed. R. Civ. P. 56(a). Only disputes over facts that might affect the 9 outcome of the suit will preclude the entry of summary judgment, and the disputed 10 evidence must be “such that a reasonable jury could return a verdict for the nonmoving 11 party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). 12 III. Analysis. 13 A. 14 Wells Fargo moves for partial summary judgment on the issue of lost profits, 15 arguing that the report of Plaintiffs’ expert, Michael Van Amburgh, is based on flawed 16 and inaccurate information. Doc. 108 at 3-4. 17 Wells Fargo’s Motion. 1. Choice of Law. 18 Plaintiffs contend that Texas law should apply because this case was transferred 19 from the Northern District of Texas. Doc. 112 at 3. But Plaintiffs also assert that 20 “Arizona law is not materially different” on the issue of recovery for lost profits. Id. at 4. 21 The Court need not decide a choice of law issue if the result would be the same under the 22 laws of both states. See Gianaculas v. Trans World Airlines, Inc., 761 F.2d 1391, 1393 23 (9th Cir. 1985). 24 materially different,” the Court need not decide the choice of law issue at this time. 25 2. Because Plaintiffs concede that Arizona and Texas law are “not Lost Profits. 26 Under both Arizona and Texas law, a party seeking to recover lost profits “must 27 prove those profits by competent evidence with reasonable certainty.” VingCard A.S. v. 28 Merrimac Hospitality Sys., Inc., 59 S.W.3d 847, 863 (Tex. Ct. App. 2001); see also -3- 1 Felder v. Physiotherapy Assocs., 158 P.3d 877, 887 (Ariz. Ct. App. 2007) (“The 2 requirement of ‘reasonable certainty’ in establishing the amount of damages applies with 3 added force where a loss of future profits is alleged.”) (internal brackets, quotation marks, 4 and citation omitted). Courts focus first on whether a plaintiff can establish the fact of 5 lost profits. Felder, 158 P.3d at 887; see also Pace Corp. v. Jackson, 284 S.W.2d 340, 6 348 (Tex. 1955) (“[C]ourts draw a distinction between uncertainty merely as to the 7 amount and uncertainty as to the fact of legal damages . . . . uncertainty as to the amount 8 will not defeat recovery.”). 9 “[W]here it can be proven that profits were lost, ‘doubts as to the extent of the 10 injury should be resolved in favor of the innocent plaintiff and against the wrongdoer.’” 11 Felder, 158 P.3d at 887 (internal citation omitted). “Reasonable certainty as to the 12 amount of lost profits can be shown by books of account, records of previous 13 transactions, or tax returns . . . or the ‘profit history from a similar business operated by 14 the plaintiff at a different location.’” Id. (quoting Rancho Pescado, Inc. v. Nw. Mut. Life 15 Ins. Co., 680 P.2d 1235, 1245 (Ariz. Ct. App. 1994)); see also VingCard, 59 S.W.3d 16 at 863 (“[A]t a minimum, opinions or estimates of lost profits must be based on objective 17 facts, figures, or data from which the amount of lost profits can be ascertained.”). 18 “Disagreements as to the evidence used to establish the amount of damages will go to the 19 ‘weight of the evidence.’” 20 P.2d 1252, 1255 (Ariz. Ct. App. 1986)). Felder, 158 P.3d at 887 (quoting Short v. Riley, 724 21 Wells Fargo argues that Plaintiffs’ only evidence is the testimony of “a purported 22 expert . . . who based his opinion almost entirely on a brochure created by unvetted 23 sources for the purpose of marketing the office building and billboard.” Doc. 108 at 3. It 24 further argues that Gazian has no prior “experience in owning or operating an office 25 building, billboard, or retail jewelry store,” and that Plaintiffs do not “offer any future or 26 even potential contract for any of the business ventures [they] allege would have existed 27 following the Park Plaza transaction.” Id. Wells Fargo also points out that Plaintiffs do 28 not “offer historical data from [Gazian’s] current business ventures to show that he can -4- 1 successfully run a profitable business, let alone a business similar to that which was to be 2 operated” at the Park Plaza Tower. Id. Wells Fargo spends a significant portion of its 3 motion and statement of facts challenging the information relied on by Plaintiffs’ expert, 4 Van Amburgh. It argues that Van Amburgh erroneously relied on revenue figures for the 5 Park Plaza Tower contained in a marketing memorandum without independently 6 verifying them (Doc. 108 at 10), “improperly relies on uncorroborated assertions from 7 Gazian on what he believed he could make in his new business ventures” (id. at 11), and 8 inexplicably modified the vacancy rates for the Park Plaza tower (id. at 10-11). Wells 9 Fargo finally argues that the lost profits alleged by Plaintiffs are speculative because “the 10 funding of Park Plaza may or may not have happened[.]” Id. at 13. 11 Wells Fargo’s arguments do not provide a basis for summary judgment. Wells 12 Fargo does not challenge the qualifications of the expert or the admissibility of his 13 report.2 Gazian’s inexperience managing office buildings, the allegation that he has 14 never run a profitable business, and questions concerning the sources of information or 15 methods used in Van Amburgh’s calculations certainly are matters on which Wells Fargo 16 may cross-examine Plaintiffs and Van Amburgh at trial. But the Court cannot say as a 17 matter of law that Plaintiffs can recover no lost profits based on the expert report. The 18 issues raised by Wells Fargo go to Van Amburgh’s credibility and the reliability of his 19 opinion, matters that must be resolved by the jury.3 20 21 22 23 24 2 In its reply, Wells Fargo states that “[t]here is no requirement for Wells Fargo to move to exclude Van Amburgh’s testimony because the reasons to exclude the testimony are also the reasons that Wells Fargo is entitled to summary judgment.” Doc. 115 at 11. To the extent this is a request to exclude Van Amburgh’s report, the request is denied. The Court will not consider arguments raised for the first time in a reply brief. See Lentini v. Cal. Center for the Arts, Escondido, 370 F.3d 837, 843 n.6 (9th Cir. 2004). 3 25 26 27 28 Wells Fargo appears to have overlooked a critical issue. Plaintiffs’ claims against Wells Fargo are based on allegations that Wells Fargo failed to inform them that the Kelly Defendants were not reputable and that their transaction with Plaintiffs was likely fraudulent. Plaintiffs pursued the purchase of the Park Plaza Tower because they allegedly relied on false representations made by the Kelly Defendants and the reassurance provided by Wells Fargo. Plaintiffs claim they lost the ability to consummate the transaction because of Wells Fargo’s actions, but if Wells Fargo had done what Plaintiffs claim it should have done – told Plaintiffs that the Kelly Defendants were shady characters and their securities transaction was likely a scam – Plaintiffs -5- 1 B. 2 The Kelly Defendants argue that “Wells Fargo cannot seek indemnity against the 3 Kelly Defendants for Wells Fargo’s own alleged bad acts.” Doc. 110 at 1. They note 4 that Plaintiffs’ second amended complaint “removes all claims of any kind for derivative 5 or vicarious liability on the part of Wells Fargo,” and argue that “Wells Fargo cannot pass 6 its obligations onto the Kelly Defendants and, as a matter of law, it does not have an 7 indemnity claim against the Kelly Defendants.” Id. at 3. The Kelly Defendants’ Motion. 8 Wells Fargo argues that there are “four types of indemnity in Arizona” and 9 contends that several apply here. It argues first that indemnity can be implied from the 10 terms of a contract or “when justice demands there be the right.” Doc. 114 at 3 (citing 11 INA Ins. Co. of N. Am. v. Valley Forge Ins. Co., 722 P.2d 975, 979 (Ariz. Ct. App. 12 1986)). Next, Wells Fargo argues that Plaintiffs’ allegations against it “stem[] from 13 contracts between Wells Fargo and the Kelly Defendants, or allegedly among all parties, 14 which may give rise to a claim for implied contractual indemnity.” Doc. 114 at 4. Wells 15 Fargo further argues that a “right of contractual indemnity may arise when an agent, 16 through no wrongdoing of his own, incurs liability for an act performed on behalf of a 17 principal.” INA Ins., 722 P.2d at 979. Wells Fargo, however, does not specifically 18 identify or produce any contracts that would support either a claim for implied 19 contractual indemnity or the existence of an agency relationship. 20 Wells Fargo also points to exceptions to the general rule that there is no indemnity 21 among joint tortfeasors when it is “equitable to shift liability for the loss from one joint 22 tortfeasor to another,” specifically, “when the party seeking indemnity is not at fault” or 23 when an agent “becomes liable in tort, without any fault of his own, simply by following 24 the instructions of another agent of the principal.” Cella Bar Assocs., Inc. v. Cohen, 868 25 26 27 28 would not have entered into the Park Plaza Tower transaction and would never have earned the profits alleged in their expert report. Stated differently, Wells Fargo’s alleged wrongdoing did not cause the Park Plaza Tower to fail and Plaintiffs to lose profits; it caused Plaintiffs to enter into a fraudulent transaction that had no chance of profits. Thus, Plaintiffs may have lost their investment, but they did not lose profits because of Wells Fargo’s actions. Because Wells Fargo did not make this argument in its motion for summary judgment, however, the Court cannot grant summary judgment on this basis. -6- 1 P.2d 1063, 1068-69 (Ariz. Ct. App. 1994). It contends that a material issue of fact still 2 exists as to the existence of these exceptions to the general rule. Again, however, Wells 3 Fargo has not identified any evidence to support the existence of any of these exceptions 4 to the common law rule that there is no indemnity among joint tortfeasors, nor has it 5 explained how any of the exceptions may be applicable here. 6 Wells Fargo also argues that “Plaintiff’s unproven allegations do not control Wells 7 Fargo’s right to indemnity,” and cites to INA Insurance for support. Doc. 114 at 5. INA 8 Insurance held that allegations in the complaint of “independent wrongdoing of [the 9 defendant] do not control [the defendant’s] right to indemnity.” 722 P.2d at 982. Wells 10 Fargo uses this language to argue that its right to indemnity from the Kelly Defendants is 11 not controlled by Plaintiffs’ allegations, which only assert claims against Wells Fargo. 12 Doc. 114 at 5-6. But the plaintiff in INA Insurance relied on a specific contractual 13 indemnity provision in asserting its claim for indemnity. 722 P.2d at 978. Wells Fargo 14 identifies no such contractual provision here. 15 Wells Fargo finally argues that A.R.S. § 44-2003(A) provides for joint and several 16 liability for “any person, including any dealer, salesman or agent, who made, participated 17 in or induced the unlawful sale or purchase” of securities. Doc. 114 at 6. But A.R.S. 18 § 44-2003(A) applies to “action[s] brought under § 44-2001, 44-2002 or 44-2032,” and 19 Wells Fargo offers no explanation as to whether any of these provisions are relevant here. 20 Section 44-2003(B) states that “[a]ny covered person against whom a final judgment is 21 entered in a private action is jointly and severally liable for damages only if the trier of 22 fact determines that the covered person recklessly or knowingly committed a violation of 23 this chapter.” A.R.S. § 44-2003(B). Sections 44-2003(C) and (D) provide that a covered 24 person “is liable solely for the portion of the judgment that corresponds to the percentage 25 of responsibility of the covered person,” and that the jury shall make findings “for each 26 covered person and any other person the parties claim to have caused or contributed to 27 the loss incurred by the plaintiff, including any person who has entered into a settlement 28 with the plaintiffs[.]” A.R.S. § 44-2003(C)-(D). -7- 1 Neither of the parties has explained how this provision may apply here. Plaintiffs 2 assert a claim against Wells Fargo under the Arizona Securities Act, A.R.S. § 44-1801 et 3 seq., which includes section 44-2003. See Doc. 101, ¶¶ 78-84. The Kelly Defendants’ 4 only arguments on the subject are that Wells Fargo did not raise this statute in their cross- 5 claim, that Plaintiffs have not alleged joint and several liability, and that Wells Fargo’s 6 claim for contribution is premature. Doc. 116 at 3. But they offer no argument or 7 authority to explain why this provision does not entitle Wells Fargo to indemnity. In 8 light of the poor briefing on this issue, the Court will not decide at this stage whether 9 Wells Fargo is foreclosed from seeking indemnification from the Kelly Defendants under 10 § 44-2003. Accordingly, the Court will not enter summary judgment on this basis. 11 In sum, the Kelly Defendants’ motion is quite sparse and simply states that Wells 12 Fargo does not have an indemnity claim against them, but such a motion imposes on 13 Wells Fargo the duty to “designate specific facts showing that there is a genuine issue for 14 trial” on the issue of indemnity. See Celotex Corp., 477 U.S. at 324 (internal quotation 15 marks omitted). Wells Fargo has produced no evidence to create an issue of fact as to 16 common law or contractual indemnity from the Kelly Defendants. Accordingly, the 17 Court will grant the Kelly Defendants’ motion for summary judgment as to contractual 18 and common law indemnity, but will deny the motion as to § 44-2003 of the Arizona 19 Securities Act due to the Kelly Defendants’ inadequate briefing. 20 IT IS ORDERED: 21 1. Wells Fargo’s motion for partial summary judgment (Doc. 108) is denied. 22 2. The Kelly Defendants’ motion for summary judgment (Doc. 110) is 23 granted in part and denied in part as set forth above. 24 3. Wells Fargo’s request for oral argument (Doc. 118) is denied. 25 4. The Court will set a final pretrial conference by separate order. 26 Dated this 18th day of September, 2014. 27 28 -8-

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