Gazian et al v. Wells Fargo Bank NA et al

Filing 73

ORDER denying 59 Motion to Amend/Correct; denying 60 Motion to Dismiss for Failure to State a Claim. Signed by Judge David G Campbell on 2/18/2014.(DGC, nvo)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Ken Gazian, et al.,

No. CV-13-01312-PHX-DGC
Plaintiffs,

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v.

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ORDER

Wells Fargo Bank NA, et al.,

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Defendants.

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Plaintiffs Ken Gazian, Pierre Investments, Inc., and Aragadz Foods, Inc. d/b/a

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Devanche Jewelers have filed a motion for leave to file a second amended complaint.

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Doc. 59. Defendants Hubert Kelly and Kelly and Kelly, P.C. (collectively the “Kelly

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Defendants”) have filed a motion to dismiss Defendant Wells Fargo Bank NA’s cross-

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claim against them or, in the alternative, to bifurcate. Doc. 60. The motions are fully

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briefed. For the reasons that follow, the Court will deny the motion for leave to amend

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and deny the motion to dismiss or bifurcate.1

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I.

Background.

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Plaintiffs filed this action in Texas state court in October 2012, and it was

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removed to the United States District Court for the Northern District of Texas on

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October 26, 2012. Doc. 1. On June 28, 2013, Judge O’Connor ordered that the case be

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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).

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transferred to this Court. Doc. 39. Plaintiffs filed their First Amended Complaint

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(“FAC”) on October 28, 2013, asserting a number of claims against the Kelly Defendants

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and Wells Fargo arising out of an allegedly “fraudulent scheme orchestrated by the Kelly

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Defendants.”

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Defendants for a transaction that the Kelly Defendants asserted was worth more than

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$45,000,000 and “would yield a return of $280,000” for Plaintiffs. Id., ¶ 10. Plaintiffs

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allege that Wells Fargo “assured Plaintiffs on multiple occasions” that the transaction was

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valid,” and confirmed that the Kelly Defendants had an account at Wells Fargo with

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“funds in excess of $280,000.” Id., ¶¶ 11, 14. Plaintiffs claim that they entered into an

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“Irrevocable Commitment” with the Kelly Defendants and Wells Fargo that set forth the

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terms discussed above. Id., ¶ 12.

Doc. 51, ¶ 9.

Plaintiffs allege that they paid $80,000 to the Kelly

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Plaintiffs assert that they were convinced by the Kelly Defendants in October 2011

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to reinvest the $280,000 promised by the Irrevocable Commitment – rather than

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withdrawing it as scheduled – to “fund a $5,000,000 loan to purchase and renovate” an

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office tower in Dallas. Id., ¶ 16. Plaintiffs also agreed to pay an additional $50,000 to

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fund the transaction.

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attempted to transfer the funds guaranteed by the Irrevocable Commitment to the Kelly

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Defendants, they “were informed by Wells Fargo that the accounts had been emptied and

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that Wells Fargo would not pay any amount to Plaintiffs pursuant to the Irrevocable

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Commitment.” Id., ¶ 21.

Id.

Plaintiffs assert that on November 29, 2011, when they

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The day after Plaintiffs’ FAC was filed, the Kelly Defendants filed a notice of

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settlement. Doc. 53. Wells Fargo answered Plaintiffs’ FAC on November 15, 2013, and

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asserted a cross-claim for indemnity against the Kelly Defendants. Doc. 56. The Court

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dismissed Plaintiffs’ complaint as to the Kelly Defendants on November 26, 2013.

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Doc. 58. Plaintiffs’ motion for leave to amend and the Kelly Defendants’ motion to

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dismiss or bifurcate followed on December 6, 2013. Docs. 59, 60.

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II.

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Leave to Amend.
The Court’s case management order entered on August 29, 2013, established a

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deadline for amending pleadings of October 28, 2013. Doc. 50 at 1. Plaintiffs’ motion

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was filed on December 6, 2013, well after the deadline. See Doc. 59. Plaintiffs’ motion,

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in effect, asks the Court to extend the deadline for amending pleadings.

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A schedule established under Rule 16 of the Federal Rules of Civil Procedure may

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be extended only upon a showing of “good cause.” Fed. R. Civ. P. 16(b)(4). Rule 16’s

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good cause standard primarily considers the diligence of the party seeking the

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amendment. Johnson v. Mammoth Recreation, Inc., 975 F.2d 604, 609 (9th Cir. 1992).

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“The district court may modify the pretrial schedule ‘if it cannot reasonably be met

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despite the diligence of the party seeking the extension.’” Id. (quoting Fed. R. Civ. P. 16

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advisory committee notes (1983 amendment)).

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Plaintiffs’ motion does not address the good cause requirement, much less show

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good cause for extending the amendment deadline. The Court will therefore deny the

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motion.

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III.

Cross-Claim.

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A.

Motion to Dismiss.

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When analyzing a complaint for failure to state a claim to relief under

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Rule 12(b)(6), the well-pled factual allegations are taken as true and construed in the light

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most favorable to the nonmoving party. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th

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Cir. 2009). Legal conclusions couched as factual allegations are not entitled to the

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assumption of truth, Ashcroft v. Iqbal, 556 U.S. 662, 680 (2009), and therefore are

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insufficient to defeat a motion to dismiss for failure to state a claim, In re Cutera Sec.

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Litig., 610 F.3d 1103, 1108 (9th Cir. 2010). To avoid a Rule 12(b)(6) dismissal, the

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complaint must plead enough facts to state a claim to relief that is plausible on its face.

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Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). This plausibility standard “is not

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akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a

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defendant has acted unlawfully.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at

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556). “[W]here the well-pleaded facts do not permit the court to infer more than the mere

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possibility of misconduct, the complaint has alleged – but it has not ‘show[n]’ – ‘that the

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pleader is entitled to relief.’” Id. at 679 (quoting Fed. R. Civ. P. 8(a)(2)).
The Kelly Defendants rely heavily on Plaintiffs’ Second Amended Complaint

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(“SAC”) as a basis for their motion to dismiss.

They argue that “Plaintiffs have

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abandoned any allegations that Wells Fargo was a guarantor of the Irrevocable

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Commitment with their proposed Second Amended Complaint, and no party currently

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contends that Wells Fargo is obligated to pay any amount as a guarantor.” Doc. 60 at 4.

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They also argue that the SAC effectively eliminates contract claims, leaving only tort

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claims against Wells Fargo, and that Wells Fargo cannot obtain indemnification for tort

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claims against the Kelly Defendants because Arizona and Texas have barred such claims.

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As noted above, the Court has denied Plaintiffs’ motion for leave to file the SAC. The

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Kelly Defendants therefore cannot rely upon that pleading as the basis for their motion.

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The Kelly Defendants’ arguments regarding the abolishment of indemnification

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claims are deficient for several other reasons. They acknowledge that the abolition of

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joint and several liability in Texas and Arizona (and the related abolition of contribution

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actions, which they equate to abolishing indemnification in this case) has several

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exceptions, but they do not discuss the exceptions in any detail or explain why they do

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not apply here. The Kelly Defendants also argue that Texas law applies because the law

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applicable to a case does not change upon transfer of venue, but they do not explain why

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Texas law would have applied in this case before the transfer of venue. A choice of law

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analysis may be required in this case. In addition, the Kelly Defendants argue for the first

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time in their reply that Wells Fargo’s cross-claim is deficient under the Supreme Court’s

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decisions in Twombly and Iqbal. Doc. 66 at 4. The Court will not consider arguments

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raised for the first time in a reply brief. Lentini v. Cal. Center for the Arts, Escondido,

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370 F.3d 837, 843 n. 6 (9th Cir. 2004).

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Finally, the Kelly Defendants argue that Texas’ circuity of action doctrine would

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bar Wells Fargo’s indemnity claim. Doc. 60 at 6. In addition to the unresolved question

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of whether Texas law applies, Wells Fargo points out that the cited authority would

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support the dismissal of Plaintiffs’ claims based on the circuity of action doctrine, not

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Wells Fargo’s claims. Doc. 65 at 8; see also In re El Paso Refinery, LP, 302 F.3d 343,

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349-50 (5th Cir. 2002) (noting that “Texas courts apply the circuity of action doctrine to

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extinguish a plaintiff’s cause of action when, as a result of indemnification obligations or

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settlement agreements between parties, a plaintiff would end up indemnifying another

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party for its own original claim”). Wells Fargo is correct. This argument also does not

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provide a basis for dismissing Wells Fargo’s claim. The Court will deny the Kelly

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Defendants’ motion to dismiss.

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B.

Motion to Bifurcate.

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The Kelly Defendants argue in the alternative that the Court should bifurcate

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Wells Fargo’s indemnity claims for a separate trial. Doc. 60 at 7. They argue that if they

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“were required to litigate the indemnity claims at this time, they would lose one of the

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most important benefits of settlement” because they “would be forced to incur all the

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costs of litigation solely on the basis of the dubious indemnity claims filed by Wells

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Fargo[.]”

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judicial economy because the Court “may not need to reach any indemnification claim.”

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Id. at 8. Finally, the Kelly Defendants argue that Wells Fargo would not be prejudiced by

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bifurcation because the indemnification claims “cannot be litigated in any practical

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purpose until a judgment determines that Wells Fargo is without fault[.]” Id. at 9.

Id.

The Kelly Defendants further argue that bifurcation would promote

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Wells Fargo counters that bifurcation is not appropriate because “[t]he

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determination of Wells Fargo’s fault (if any) for Plaintiffs’ losses and the indemnity

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liability of the Kelly Defendants to Wells Fargo will involve the same witnesses and

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documentary evidence.” Doc. 65 at 11. Wells Fargo also contends that it would be

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prejudiced by bifurcation because it “would be forced to litigate the same issues twice,

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risk inconsistent verdicts or findings, and lose the efficiency of having the Kelly

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Defendants as parties, subject to the normal rules of discovery, in the Plaintiffs’ action.”

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Id. at 13.

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The Kelly Defendants have neither demonstrated that bifurcating Wells Fargo’s

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cross-claim would avoid prejudice, nor that it would promote convenience or judicial

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economy. As Wells Fargo notes, the witnesses and evidence required for their cross-

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claim are the same as those required for the underlying claim. Bifurcating this case could

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result in discovery being conducted twice, once in the main action and a second time in

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the indemnification action. In addition, legal issues and other motions to be resolved by

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the Court should be resolved only once, with all parties participating fully.

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IT IS ORDERED that Plaintiffs’ motion for leave to amend (Doc. 59) is denied.

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The Kelly Defendants’ motion to dismiss or, in the alternative, to bifurcate (Doc. 60) is

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also denied.

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Dated this 18th day of February, 2014.

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