Dhaliwal et al v. Singh et al

Filing 25

ORDER on Defendants' F.R.Civ.P. 12 Motions 16 , 18 , signed by District Judge Lawrence J. O'Neill on 8/16/13: Chandi & Sons and Chandi Brothers shall file and serve an answer to the FAC, no later than September 4, 2013. (Hellings, J)

1
2
3
4
5

UNITED STATES DISTRICT COURT

6

EASTERN DISTRICT OF CALIFORNIA

7
8
9

JAGJEEVAN K. DHALIWAL,
et al.,
Plaintiffs,

10
11
12

CASE NO. CV F 13-0484 LJO SKO

ORDER ON DEFENDANTS' F.R.Civ.P. 12
MOTIONS
(Docs. 16,18.)

vs.

13
14
15
16
17

NIRMAL SINGH, et al.,
Defendants.
______________________________/

18
19
20
21

PRELIMINARY STATEMENT TO THE PARTIES AND COUNSEL

22

Judges in the Eastern District of California carry the heaviest caseload in the nation,

23

and this Court is unable to devote inordinate time and resources to individual cases and

24

matters. This Court cannot address all arguments, evidence and matters raised by parties and

25

addresses only the arguments, evidence and matters necessary to reach the decision in this

26

order given the shortage of district judges and staff. The parties and counsel are encouraged to

27

contact United States Senators Diane Feinstein and Barbara Boxer to address this Court’s

28

inability to accommodate the parties and this action. The parties are required to consider, and
1

1

if necessary, to reconsider consent to one of the Court's U.S. Magistrate Judges to conduct all

2

further proceedings in that the Magistrate Judges’ availability is far more realistic and

3

accommodating to parties than that of U.S. District Judge Lawrence J. O'Neill who must

4

prioritize criminal and older civil cases. A Magistrate Judge consent form is available on this

5

Court’s website.

6

Civil trials set before Judge O'Neill trail until he becomes available and are subject to

7

suspension mid-trial to accommodate criminal matters. Civil trials are no longer reset to a later

8

date if Judge O'Neill is unavailable on the original date set for trial. If a trial trails, it may

9

proceed with little advance notice, and the parties and counsel may be expected to proceed to

10

trial with less than 24 hours notice. Moreover, this Court’s Fresno Division randomly and

11

without advance notice reassigns civil actions to U.S. District Judges throughout the nation to

12

serve as visiting judges. In the absence of Magistrate Judge consent, this action is subject to

13

reassignment to a U.S. District Judge from outside the Eastern District of California. Case

14

management difficulties, including trial setting and interruption, are avoided if the parties

15

consent to conduct of further proceedings by one of this Court's U.S. Magistrate Judge.
INTRODUCTION

16
17

All defendants1 seek to dismiss as inadequately pled and barred by limitations defenses

18

and prior order plaintiffs Jagjeevan K. Dhaliwal (“Ms. Dhaliwal”) and Mohinder S. Gill’s

19

(“Mr. Gill’s”) claims arising out of investment in Stanislaus County gas stations/convenience

20

stores. Ms. Dhaliwal and Mr. Gill (collectively "plaintiffs") respond that their claims are

21

timely and adequately pled to accuse defendants of wrongdoing.

22

defendants' F.R.Civ.P. 12(b)(6) motions to dismiss on the record without a hearing, pursuant to

23

Local Rule 230(g). For the reasons discussed below, this Court DISMISSES plaintiffs' claims,

24

except for breach of contract against Chandi & Sons and involuntary dissolution against

25

Chandi & Sons and Chandi Brothers.

This Court considered

26
27
28

1

Defendants are Nirmal Singh ("Mr. Singh"), Nachhattar Singh Chandi (“Mr. Chandi”), Susana
Chandi (“Ms. Chandi”), KS Chandi & Sons, Inc. ("Chandi & Sons"), Chandi Brothers, LLC ("Chandi Brothers"),
and Valley Petroleum, Inc. ("Valley Petroleum") and will be referred to collectively as “defendants.”

2

1

BACKGROUND2

2

Summary

3

Mr. Singh is an ARCO AM PM (“AM PM”) franchisee and developer who sought

4

investors with him and his brother and sister-in-law Mr. Chandi and Ms. Chandi3 to purchase

5

and develop AM PM gas station/convenience stores. The Chandis reside in Riverside County

6

and with Mr. Singh own more than 10 California AM PM’s. Chandi & Sons, Chandi Brothers

7

and Valley Petroleum are California corporations principally located in Turlock, California. At

8

relevant times, Mr. Singh was the chief financial officer (“CFO”) and shareholder of Chandi &

9

Sons and Chandi Brothers, and the Chandis were President and Secretary of Chandi & Sons

10

and Chandi Brothers. Plaintiffs are husband and wife and Canadian physicians who claim to

11

have invested in AM PM’s at issue in this action. The complaint alleges common law and

12

statutory claims that defendants bilked plaintiffs out of $1.35 million to invest in AM PM’s.
Plaintiffs' Inducement To Invest

13
14

In September 2006, Mr. Singh induced plaintiffs to part with $1.35 million to acquire

15

50 percent ownership interests in each of Chandi & Sons and Chandi Brothers and "to purchase

16

gas stations." Mr. Singh assured plaintiffs that each station would make $30,000 per month

17

after six months operation. Mr. Singh prepared forged articles of incorporation of Chandi &

18

Sons which reflected that Chandi & Sons was authorized to issue 1,000 shares although the

19

bona fide articles of incorporation reflect that Chandi & Sons was authorized to issue 2000

20

shares.

21

On September 5, 2006, "Plaintiffs gave $1.35 million to Defendants." November 22,

22

2006 board of directors minutes reflect that each plaintiff owned 25 percent of each of Chandi

23
24
25
26

2

The factual recitation summarizes generally, and to the best of this Court's ability, plaintiffs'
operative First Amended Complaint ("FAC") and other matters which this Court may consider. Despite the
admonitions of this Court's June 12, 2013 order ("June 12 order"), the FAC fails to allege facts clearly to frustrate
federal pleading requirements and purposes.

27
28

3

Mr. and Ms. Chandi will be referred to collectively as the "Chandis."

3

1

& Sons' and Chandi Brothers' shares and that Mr. Singh owned the remaining 50 percent shares

2

of each of Chandi & Sons and Chandi Brothers. Plaintiffs believe that $850,000 of their

3

money was used to purchase a Hatch Road AM PM ("Hatch AM PM") in Ceres, California

4

and that their remaining $500,000 was devoted to a Mitchell Road AM PM (Mitchell AM PM)

5

in Ceres. Mr. Singh stated that he would sell the Hatch AM PM for a $1 million profit prior to

6

July 2007 and give 50 percent of the sale profit to plaintiffs. Mr. Singh executed a September

7

27, 2006 trust deed for Chandi Brothers "in consideration of" a $850,000 "indebtedness."

8

Plaintiffs claim that the trust deed was to be recorded against a Glenwood Road AM PM

9

("Glenwood AM PM") in Turlock, California and that they had acquired collectively 50

10

percent of the shares of each of Chandi & Sons and Chandi Brothers.
Plaintiffs' Certificate Of Investment

11
12

In January 2007, Mr. Singh claimed that the AM PMs were doing well and paid

13

plaintiffs $25,000 as well as "payments of $4,600 per month as share payments" in Chandi &

14

Sons and Chandi Brothers.

15

In July 2007, after a sale of the Hatch AM PM did not close, Mr. Singh stated he would

16

buy plaintiffs' shares of the Hatch AM PM for $200,000, rather than $500,000 originally

17

promised, when he closed the sale and would pay plaintiffs back with a refinanced loan. Mr.

18

Singh signed a July 20, 2007 Certificate of Investment (“COI”) as CFO for Chandi & Sons and

19

Chandi Brothers and to certify plaintiffs’ $1,340,000 investment on November 22, 2006 with

20

Chandi & Sons and Chandi Brothers for 18 months in apparently the Hatch Road AM PM and

21

secured up to $850,000 by a deed of trust apparently on a Lander Avenue AM PM ("Lander

22

AM PM") in Turlock. The COI commits Chandi & Sons and Chandi Brothers to pay eight

23

percent interest each month and “a fixed profit of $200,000.” Mr. Singh told plaintiffs that

24

they would continue to own their Chandi & Sons and Chandi Brothers shares until plaintiffs

25

were repaid.

26

In December 2007, Mr. Singh stated that the U.S. economy was "very bad" and that

27

banks were not making loans to require another year for him to secure a loan. Mr. Singh

28

continued to make timely $8,933 monthly interest payments on plaintiffs' $1.35 million
4

1

investment but stopped making $4,600 monthly distributions on shares "stating that due to the

2

bad economy the station . . . was actually losing money."

3

Chandi & Sons' Promissory Note

4

In July 2008, Mr. Singh was unable to refinance the Hatch AM PM and to pay plaintiffs

5

$200,000. Mr. Singh told plaintiffs that the Hatch AM PM was not doing well and asked for

6

an extension. Mr. Singh as Chandi & Sons’ owner executed a July 15, 2008 Promissory Note

7

with Balloon Payment (“promissory note”) to pay plaintiffs $1,350,000 “payable in monthly

8

interest installments of $8933.00 calculated at an interest of 8% per annum, concluding with

9

one Balloon Payment of the principal amount plus any interest and/or penalties outstanding.”

10

The promissory note states it “is secured by a Deed of Trust of Even Date herewith.” Plaintiffs

11

identify the Hatch AM PM as the secured property for the promissory note and characterize the

12

promissory note to supersede the COI, which was rendered invalid. The promissory note does

13

not indicate the date for a balloon payment.

14

Mr. Singh represented to plaintiffs that the promissory note was better security because

15

it waived limitations defenses. The promissory note states that "[e]ach maker . . . waives

16

presentment, demand and protest and the right to assert any statute of limitations." (Bold

17

added.)

18

When plaintiffs asked Mr. Singh about distribution on shares, Mr. Singh presented that

19

"the station was just breaking," there was no income, and he could not pay out any distribution

20

on the shares.

21
22
23

In September 2009, Mr. Singh told plaintiffs that a bank had agreed to refinance his
AM PMs and that he would be able to pay their note in about three months.
India Home Sale Proceeds

24

In November 2009, Mr. Singh borrowed $177,500 from the sale of plaintiffs' home in

25

India to improve the Glenwood AM PM. Mr. Singh represented that, using the FAC's words,

26

"for two years he would make no interest payment and would return the money in full, but if he

27

did not return the money in full by the end of one year, he would pay 8% interest on it."

28

Plaintiffs' opposition papers indicate that Mr. Singh represented he would pay eight percent
5

1

interest "if he did not return the money in full by the end of one year."

2

Plaintiffs' Request For Return Of Funds

3

In January 2010, plaintiffs inquired of Mr. Singh about refinancing.

Mr. Singh

4

represented that "the bank had refused to refinance the stations." Having grown tired of Mr.

5

Singh's excuses for inability to refinance, plaintiffs "asked for their funds back." Mr. Singh

6

responded that plaintiffs had two choices:

7

1.

Purchase the Hatch AM PM for $4.6 million, which would require plaintiffs to

8

obtain an unavailable loan, operate the Hatch AM PM without Mr. Singh, and face the

9

likelihood of losing their investment; or

10
11

2.

Allow Mr. Singh to continue to operate the Hatch AM PM for another year as

the U.S. economy improved and he could pay plaintiffs back.

12

Mr. Singh told plaintiffs that:

13

1.

14

Pursuant to the promissory note, plaintiffs had consented to an automatic

renewal and waived right to presentments;

15

2.

Plaintiffs were compelled to wait for Mr. Singh to refinance the Hatch AM PM;

16

3.

Plaintiffs should feel safe because the promissory note waived limitations

17
18
19
20
21

defenses; and
4.

Mr. Singh would stop making payments if plaintiffs filed a lawsuit and would

drag out the case during which plaintiffs would receive no income.
Having no choice, plaintiffs, apparently in January 2010, extended the promissory note.
Continuing Payments To Plaintiffs

22

From apparently January 2010, Mr. Singh continued to make $8,933 monthly payments

23

representing eight percent interest on $1.35 million. In January 2011, plaintiffs asked for the

24

promissory note's balloon payment and threatened litigation if it was not paid. Mr. Singh

25

stated that the AM PMs had improved and that he would start to pay on plaintiffs' shares and

26

the promissory note's principal.

27

Beginning in March 2011, Mr. Singh made $15,000 monthly payments comprising

28

$8,933 interest on the promissory note and $6,067 distributions on shares of Chandi & Sons
6

1

and Chandi Brothers. In May 2011, Mr. Singh increased the monthly payments to $15,800

2

with the additional $800 toward principal of the promissory note. In May 2011, Mr. Singh

3

represented that he would pay off the promissory note within 18 months as he would obtain

4

refinancing from Wells Fargo Bank within a year.

5
6

In December 2011, Mr. Singh wired $40,000 to plaintiffs toward the promissory note's
principal.
Wells Fargo Refinancing

7
8

In March 2012, Mr. Singh represented to plaintiffs that he was seeking Wells Fargo

9

Bank refinancing for the Hatch AM PM and that he would obtain a line of credit to make a

10

$600,000 lump sum payment to plaintiffs. In June 2012, Mr. Singh misrepresented that Wells

11

Fargo Bank refused to refinance in that Wells Fargo Bank had provided May 9, 2012

12

refinancing of $7.3 million for AM PMs, including the Hatch AM PM, and provided a

13

$600,000 line of credit that Mr. Singh did not use to pay plaintiffs but rather used to purchase a

14

Modesto property.
Termination Of Payments To Plaintiffs

15
16

In October 2012, Mr. Singh increased plaintiffs' monthly payments to $16,000, with

17

allocations of $8,933 for interest on the promissory note, $6,067 for distribution on shares, and

18

$1,000 for principal on the promissory note.

19

In December 2012, after Kevin and Pauline Doan and Harpreet Dhaliwal (collectively

20

the "Doan plaintiffs") filed litigation against Mr. Singh, Chandi & Sons and Chandi Brothers,

21

Mr. Singh stopped plaintiffs' payments. In January 2013, Mr. Singh told plaintiffs that:

22
23
24
25

1.

Mr. Singh would make no further payments unless plaintiffs compelled the

Doan plaintiffs to dismiss their litigation and settle with Mr. Singh on his terms;
2.

Mr. Singh would pay plaintiffs $25,000 monthly for two years and then make a

balloon balance payment if the Doan plaintiffs dismissed their litigation; and

26

3.

Plaintiffs needed to revoke the promissory note.

27

Plaintiffs responded they would not intimidate the Doan plaintiffs to dismiss their

28

litigation and that plaintiffs considered to contact the Doan plaintiffs' attorney. Mr. Singh
7

1

stated he would drag out litigation, use plaintiffs' money to fight them, and cause plaintiffs "to

2

spend a lot of money." Mr. Singh further stated that if plaintiffs succeeded in litigation after

3

three years, Mr. Singh would file for bankruptcy and never return plaintiffs' money to compel

4

plaintiffs to force the Doan plaintiffs to drop their litigation.

5

The FAC identifies November 2012 as plaintiffs' last payment.

In January 2013,

6

plaintiffs told Mr. Singh that he had 45 days to resume payments prior to plaintiffs initiating

7

litigation. Plaintiffs sent Mr. Singh an email that they would call the promissory note due if

8

Mr. Singh did not resume payments. On February 14, 2013, plaintiffs sent defendants a notice

9

of default and demand for full payment of the promissory note.
Plaintiffs' Claims

10
11

On April 3, 2013, plaintiffs filed their original complaint to allege breach of contract,

12

fraud, conversion, securities and related claims. The June 12 order dismissed most of the

13

original complaint's claims and several of such claims with prejudice. The June 12 order

14

admonished plaintiffs to file an amended complaint to amend only limited claims dismissed

15

without prejudice. The June 12 order further admonished:

16
17
18
19
20

Without this Court’s order, plaintiffs are prohibited to allege claims dismissed with
prejudice and to add claims not alleged in the complaint. If plaintiffs elect to amend
the claims dismissed with leave to amend, plaintiffs are admonished to pursue only
such claims based on sufficient supporting facts and law, that plaintiffs’ counsel is
subject to liability under 28 U.S.C. § 1927, F.R.Civ.P. 11, and other authorities, that
this Court will grant plaintiffs no further attempt to plead claims, and that disobedience
of this order is grounds to dismiss an amended complaint[.] (Bold added.)

21

In response to the June 12 order, plaintiffs filed their FAC to allege breach of contract,

22

fraud and securities claims and to add claims which this Court has not authorized. The FAC's

23

claims will be discussed below.

24

DISCUSSION

25

F.R.Civ.P. 12(b)(6) Motion to Dismiss Standards

26

Defendants challenge the FAC's claims as barred legally and by the June 12 order.

27

A F.R.Civ.P. 12(b)(6) dismissal is proper where there is either a “lack of a cognizable

28

legal theory” or “the absence of sufficient facts alleged under a cognizable legal theory.”
8

1

Balisteri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990); Graehling v. Village of

2

Lombard, Ill., 58 F.3d 295, 297 (7th Cir. 1995). A F.R.Civ.P. 12(b)(6) motion “tests the legal

3

sufficiency of a claim.” Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001).

4

In addressing dismissal, a court must: (1) construe the complaint in the light most

5

favorable to the plaintiff; (2) accept all well-pleaded factual allegations as true; and (3)

6

determine whether plaintiff can prove any set of facts to support a claim that would merit

7

relief. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-338 (9th Cir. 1996). Nonetheless, a

8

court is not required “to accept as true allegations that are merely conclusory, unwarranted

9

deductions of fact, or unreasonable inferences.” In re Gilead Sciences Securities Litig., 536

10

F.3d 1049, 1055 (9th Cir. 2008) (citation omitted). A court “need not assume the truth of legal

11

conclusions cast in the form of factual allegations,” U.S. ex rel. Chunie v. Ringrose, 788 F.2d

12

638, 643, n. 2 (9th Cir.1986), and must not “assume that the [plaintiff] can prove facts that it

13
14

has not alleged or that the defendants have violated . . . laws in ways that have not been
alleged.” Associated General Contractors of California, Inc. v. California State Council of

15
Carpenters, 459 U.S. 519, 526, 103 S.Ct. 897 (1983). A court need not permit an attempt to
16
17
18
19
20
21

amend if “it is clear that the complaint could not be saved by an amendment.” Livid Holdings
Ltd. v. Salomon Smith Barney, Inc., 416 F.3d 940, 946 (9th Cir. 2005).
A plaintiff is obliged “to provide the ‘grounds’ of his ‘entitlement to relief’ [which]
requires more than labels and conclusions, and a formulaic recitation of the elements of a cause
of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 554,127 S. Ct. 1955, 1964-65

22

(2007) (internal citations omitted). Moreover, a court “will dismiss any claim that, even when

23

construed in the light most favorable to plaintiff, fails to plead sufficiently all required

24

elements of a cause of action.” Student Loan Marketing Ass'n v. Hanes, 181 F.R.D. 629, 634

25

(S.D. Cal. 1998). In practice, a complaint “must contain either direct or inferential allegations

26

respecting all the material elements necessary to sustain recovery under some viable legal

27

theory.” Twombly, 550 U.S. at 562, 127 S.Ct. at 1969 (quoting Car Carriers, Inc. v. Ford

28

Motor Co., 745 F.2d 1101, 1106 (7th Cir. 1984)).
9

In Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949 (2009), the U.S. Supreme

1
2

Court explained:

3

6

. . . a complaint must contain sufficient factual matter, accepted as true, to
“state a claim to relief that is plausible on its face.” . . . A claim has facial plausibility
when the plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged. . . . The plausibility
standard is not akin to a “probability requirement,” but it asks for more than a sheer
possibility that a defendant has acted unlawfully. (Citations omitted.)

7

After discussing Iqbal, the Ninth Circuit summarized: “In sum, for a complaint to

8

survive [dismissal], the non-conclusory ‘factual content,’ and reasonable inferences from that

9

content, must be plausibly suggestive of a claim entitling the plaintiff to relief.” Moss v. U.S.

10

Secret Service, 572 F.3d 962, 989 (9th Cir. 2009) (quoting Iqbal, 556 U.S. 662, 129 S.Ct. at

4
5

11
12

1949).
The U.S. Supreme Court applies a “two-prong approach” to address dismissal:

13
14
15
16
17
18

First, the tenet that a court must accept as true all of the allegations contained in
a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of
a cause of action, supported by mere conclusory statements, do not suffice. . . . Second,
only a complaint that states a plausible claim for relief survives a motion to dismiss. . . .
Determining whether a complaint states a plausible claim for relief will . . . be a
context-specific task that requires the reviewing court to draw on its judicial experience
and common sense. . . . But where the well-pleaded facts do not permit the court to
infer more than the mere possibility of misconduct, the complaint has alleged – but it
has not “show[n]”-“that the pleader is entitled to relief.” Fed. Rule Civ. Proc. 8(a)(2).

19
20
21
22
23
24
25

In keeping with these principles a court considering a motion to dismiss can
choose to begin by identifying pleadings that, because they are no more than
conclusions, are not entitled to the assumption of truth. While legal conclusions can
provide the framework of a complaint, they must be supported by factual allegations.
When there are well-pleaded factual allegations, a court should assume their veracity
and then determine whether they plausibly give rise to an entitlement to relief.
Iqbal, 556 U.S. 662, 129 S.Ct. at 1949-1950.
Moreover, “a complaint may be dismissed under Rule 12(b)(6) when its own

26

allegations indicate the existence of an affirmative defense.”

27

American/Credit, Inc., 727 F.2d 1067, 1069 (11th Cir. 1984). For instance, a limitations

28

defense may be raised by a F.R.Civ.P. 12(b)(6) motion to dismiss. Jablon v. Dean Witter &
10

Quiller v. Barclays

1

Co., 614 F.2d 677, 682 (9th Cir. 1980); see Avco Corp. v. Precision Air Parts, Inc., 676 F.2d

2

494, 495 (11th Cir. 1982), cert. denied, 459 U.S. 1037, 103 S.Ct. 450 (1982).

3

Lastly, a court may consider exhibits submitted with the complaint. Durning v. First

4

Boston Corp., 815 F.2d 1265, 1267 (9th Cir. 1987); Van Winkle v. Allstate Ins. Co., 290

5

F.Supp.2d 1158, 1162, n. 2 (C.D. Cal. 2003). A “court may consider evidence on which the

6

complaint ‘necessarily relies’ if: (1) the complaint refers to the document; (2) the document is

7

central to the plaintiff's claim; and (3) no party questions the authenticity of the copy attached

8

to the 12(b)(6) motion.” Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006). A court may

9

treat such a document as “part of the complaint, and thus may assume that its contents are true

10

for purposes of a motion to dismiss under Rule 12(b)(6).” United States v. Ritchie, 342 F.3d

11

903, 908 (9th Cir.2003).

12

12(b)(6) motion by deliberately omitting reference to documents upon which their claims are

13

based.” Parrino v. FHP, Inc., 146 F.3d 699, 706 (9th Cir. 1998).4

14

allegations in the complaint if contradicted by facts established by exhibits attached to the

15

complaint.” Sumner Peck Ranch v. Bureau of Reclamation, 823 F.Supp. 715, 720 (E.D. Cal.

16

1993) (citing Durning v. First Boston Corp., 815 F.2d 1265, 1267 (9th Cir.1987)).5

A “court may disregard

With these standards in mind, this Court turns to defendants’ challenges to the FAC’s

17
18

Such consideration prevents “plaintiffs from surviving a Rule

claims.

19

Breach Of Contract

20

Mr. Singh

21

The title of the FAC's (first) breach of contract claim indicates it is "Against Defendants

22

Singh, KS Chandi & Sons, Inc. and Chandi Brothers, LLC only." The claim appears to

23
24
25

4

“We have extended the ‘incorporation by reference’ doctrine to situations in which the
plaintiff’s claim depends on the contents of a document, the defendant attaches the document to its motion to
dismiss, and the parties do not dispute the authenticity of the document, even though the plaintiff does not
explicitly allege the contents of that document in the complaint.” Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir.
2005) (citing Parrino, 146 F.3d at 706).

26
27
28

5

Plaintiffs' opposition papers include unauthenticated exhibits lacking foundation. This Court
disapproves of plaintiffs' reliance on such documents which are not subject to consideration on a F.R.Civ.P.
12(b)(6) motion to dismiss. As such, this Court need not more specifically address defendants' objections to the
opposition exhibits.

11

1

proceed on the promissory note in that it alleges: "In December 2012, Defendant KS Chandi

2

Sons breached the terms of the Promissory Note and failed to make the monthly payments."

3

The June 12 order dismissed with prejudice breach of contract claims against Mr.

4

Singh, especially given the absence of a writing to which he was a party. Despite the breach of

5

contract claim's title, plaintiffs claim Mr. Singh "is not a defendant in the first claim." This

6

Court construes the claim's title to include erroneously Mr. Singh. Nonetheless, to clarify, Mr.

7

Singh is not subject to a breach of contract claim.
Chandi Brothers

8
9

Defendants contend that Chandi Brothers is not liable for breach of contract in that the

10

promissory note is the only document to support a breach of contract and is signed only by

11

Chandi & Sons. Plaintiffs offer nothing to oppose Chandi Brothers dismissal from the breach

12

of contract claim. As such, like Mr. Singh, Chandi Brothers is not subject to breach of contract

13

liability.

14

Breach Of Fiduciary Duty

15

In disobedience of the June 12 order, the FAC adds an unauthorized (second) breach of

16

fiduciary duty claim against "all defendants" and which apparently is based on breach of a

17

Chandi Brothers "Operating Agreement" for failure "to issue writings which reflect the

18

ownership interest" and "to permit inspection" and engaging in fraud.

19

June 12 Order's Bar To Add Claims

20

Plaintiffs' original complaint lacked a breach of fiduciary duty claim. The June 12

21

order barred addition of new claims, such as the breach of fiduciary duty claim, without this

22

Court's order. Plaintiffs' unexplained disobedience of the June 12 order warrants dismissal of

23

the breach of fiduciary duty claim.

24
25

Insufficient Pleading
Defendants challenge the breach of fiduciary duty claim as insufficiently pled.

26

“The elements of a cause of action for breach of fiduciary duty are: (1) the existence of a

27

fiduciary duty; (2) a breach of the fiduciary duty; and (3) resulting damage. Pellegrini v.

28

Weiss, 165 Cal.App.4th 515, 524, 81 Cal.Rptr.3d 387 (2008).
12

1

A fiduciary relationship arises “between parties to a transaction wherein one of the

2

parties is . . . duty bound to act with the utmost good faith for the benefit of the other party.”

3

Herbert v. Lankershim, 9 Cal.2d 409, 483, 71 P.2d 220 (1937). A fiduciary relationship

4

“ordinarily arises where a confidence is reposed by one person in the integrity of another, and

5

in such a relation the party in whom the confidence is reposed, if he voluntarily accepts or

6

assumes to accept the confidence, can take no advantage from his acts relating to the interest of

7

the other party without the latter's knowledge or consent.”

8

220.

Herbert, 9 Cal.2d at 483, 71 P.2d

9

Nonetheless “no fiduciary relationship is established merely because ‘the parties

10

reposed trust and confidence in each other.’” Girard v. Delta Towers Joint Venture, 20

11

Cal.App.4th 1741, 1749, 26 Cal.Rptr.2d 102 (1993) (quoting Worldvision Enterprises, Inc. v.

12

American Broadcasting Companies, Inc., 142 Cal.App.3d 589, 595, 191 Cal.Rptr. 148 (1983)).

13

To be charged with a fiduciary obligation, a person must knowingly undertake to act on behalf

14

and for the benefit of another, or must enter into a relationship which imposes that undertaking

15

as a matter of law. City of Hope Nat. Medical Center v. Genentech, Inc., 43 Cal.4th 375, 385,

16

181 P.3d 142 (2008).

17

“California courts have not extended the ‘special relationship’ doctrine to include

18

ordinary commercial contractual relationships”

19

Cal.App.3d 396, 412, 251 Cal.Rptr. 17 (1988) (citations omitted).

Martin v. U-Haul Co. Of Fresno, 204

20

The FAC lacks sufficient facts to support a fiduciary relationship among plaintiffs and

21

defendants. The FAC alleges ambiguous financial arrangements which culminated in the

22

promissory note. The FAC's distilled facts and inferences are that plaintiffs provided funds to

23

Mr. Singh to invest in AM PMs. Such facts and inferences reveal a commercial contractual

24

relationship, not one of trust and repose. Plaintiffs offer nothing meaningful to identify details

25

of an actionable fiduciary relationship.

26

In addition to an absence of facts to support a fiduciary relationship, the FAC lacks

27

sufficient facts to support breach of a fiduciary duty. The FAC appears to rely on a Chandi

28

Brothers operating agreement. However, such operating agreement is unapparent from the
13

1

record as is whether plaintiffs are parties to it to give rise to purported breaches.
Limitations Defense

2
3

Defendants further challenge the breach of fiduciary duty claim as barred under the

4

four-year limitations periods of California Code of Civil Procedure sections 343 (relief not

5

otherwise provided for) and 338(d) (fraud). Since the original complaint was filed on April 3,

6

2013, an alleged breach of fiduciary duty would need to have arisen since April 3, 2009, three

7

years prior to filing this action. The FAC alleges that plaintiffs paid their $1.35 million in

8

September 2006 and that the transactions culminated with the July 15, 2008 promissory note.

9

The FAC's facts and inferences are that the promissory note satisfied plaintiffs, despite the

10

absence of receipt of Chandi & Sons' and Chandi Brothers' shares. Neither the FAC nor record

11

reveals when the Chandi Brothers operating agreement was effective or secured plaintiffs

12

rights and benefits. In sum, a purported breach of fiduciary duty claim is susceptible to

13

limitations defenses to warrant further the claim's dismissal.

14

Fraud

15

Allegations

16

As to fraud, the FAC alleges (third) fraud-intentional and (fourth) negligent

17

misrepresentation claims against Mr. Singh and a (fifth) false promise claim against Mr. Singh,

18

Chandi & Sons and Chandi Brothers.

19

representations":

20

1.

These fraud claims identify the following "false

On November 22, 2006, Mr. Singh represented that Chandi & Sons' and Chandi

21

Brothers shares each totaled 1,000 and that Mr. Singh owned 100 percent of the shares and

22

could sell 50 percent of them;

23
24
25

2.

Mr. Singh provided forged articles of incorporation in that Chandi & Sons'

bonafide articles of incorporation authorized 2,000 shares;
3.

On November 22, 2006, Mr. Singh represented to plaintiffs that for their $1.35

26

million investment, plaintiffs would receive 50 percent or 500 shares of each of Chandi & Sons

27

and Chandi Brothers;

28

4.

On July 20, 2007, Mr. Singh represented that plaintiffs' money "would be
14

1

protected" by a deed of trust on the Lander AM PM;
5.

2

On July 20, 2007, Mr. Singh represented that Chandi & Sons and Chandi

3

Brothers would return plaintiffs' $1.35 million plus interest, penalties and a fixed $200,000

4

profit;

5

6.

On July 15, 2008, Mr. Singh for Chandi & Sons induced plaintiffs not to pursue

6

litigation and signed the promissory note to make eight percent interest payments of $8,933

7

monthly with a $1.35 balloon payment; and

8
9
10
11

7.

In November 2009, Mr. Singh represented that for plaintiffs' $177,500

investment in the Glenwood AM PM, Mr. Singh would return the $177,500 interest free and
give plaintiffs 50 percent equity and shares in the Glenwood AM PM.
The fraud claims identify the following "concealments" as to Chandi & Sons and

12

Chandi Brothers:

13

1.

Mr. Singh and the Chandis for Chandi Brothers executed a $1,890,400

14

promissory note, dated October 26, 2006 and payable to Altura Credit Union for the Mitchell

15

AM PM;

16

2.

17
18

Mr. Singh and the Chandis for Chandi & Sons executed a $589,600 promissory

note, dated October 30, 2006 and payable to Altura Credit Union for the Mitchel AM PM;
3.

Mr. Singh and the Chandis for Chandi Brothers executed a $1,749,600

19

promissory note, dated November 6, 2006 and payable to Altura Credit Union for the Hatch

20

AM PM and failed to disclose to Altura Credit Union that plaintiffs' money was used to

21

purchase the land of the Hatch AM PM;

22
23
24

4.

Mr. Singh and the Chandis for Chandi & Sons executed a $890,400 promissory

note, dated November 14, 2006 and payable to Altura Credit Union for the Lander AM PM;
5.

On August 12, 2008, Mr. Singh and the Chandis executed a deed of trust to

25

secure against the Glenwood AM PM a $1 million debt to Altura Credit Union and failed to

26

disclose to the Altura Credit Union that plaintiffs' money had been used to improve the

27

Glenwood AM PM and that plaintiffs owned 50 percent of the station;

28

6.

In August 2010, when obtaining a $993,482 loan from Altura Credit Union, Mr.
15

1

Singh and the Chandis failed to inform Altura Credit Union of plaintiffs' senior $850,000 lien

2

interest;

3

7.

Mr. Singh and the Chandis failed to disclose to Altura Credit Union that

4

plaintiffs' money was used to purchase the land for the Mitchell AM PM and that plaintiffs

5

own 50 percent each of Chandi & Sons and Chandi Brothers;

6
7
8
9
10
11

8.

Mr. Singh and the Chandis failed to disclose plaintiffs' interests in Chandi &

Sons and Chandi Brothers in Internal Revenue Service filings;
9.

Mr. Singh failed to disclose plaintiffs' 50 percent interests and senior liens in

Chandi & Sons and Chandi Brothers to the Doan plaintiffs when Mr. Singh induced the Doan
plaintiffs to invest in November 2011;
10.

In early 2012, Mr. Singh obtained a $7.3 million loan from Wells Fargo Bank

12

without disclosing plaintiffs' senior $850,000 lien interest and 50 percent ownership interests in

13

each of Chandi & Sons and Chandi Brothers; and

14
15

11.

By a grant deed recorded on December 20, 2012, Chandi Brothers transferred

the Lander AM PM to Turlock Petroleum.

16

The FAC's (seventh) concealment claim6 proceeds against all defendants and alleges

17

that in January 2013 when Mr. Singh told plaintiffs of the Doan plaintiffs' litigation and

18

stopped making payments to plaintiffs, plaintiffs discovered that:

19
20
21

1.

Defendants had sold Chandi & Sons' and Chandi Brothers' assets without

informing plaintiffs;
2.

Mr. Singh had misrepresented to the Doan plaintiffs that he owned 100 percent

22

of the shares of Chandi & Sons and Chandi Brothers and sold 50 percent of the shares to the

23

Doan plaintiffs and misrepresented to Wells Fargo that Mr. Singh owned 100 percent of shares;

24
25
26

3.

Defendants did not intend to give plaintiffs security for their paid monies and

that Mr. Singh had never recorded deeds of trust in plaintiffs' favor;
4.

Mr. Singh and the Chandis shut down the Glenwood AM PM, of which

27
28

6

The FAC misidentifies the concealment claim as the seventh claim. Based on the FAC's
preceding claims, the concealment claim should be the FAC's sixth claim.

16

1

plaintiffs owned 50 percent, and moved the franchise across the street to the Lander AM PM;

2

5.

Mr. Singh sold the Mitchell AM PM to the Chandis;

3

6.

The Chandis continued to operate the Mitchell AM PM after claiming they had

4

resigned as officers of Chandi & Sons and Chandi Brothers; and
7.

5

On December 20, 2011, Mr. Chandi signed a quit claim deed to transfer the

6

Mitchell AM PM from Chandi Brothers to Mitchell Corner, LLC, which Mr. Chandi solely

7

owned.
Limitations Defense And Delayed Discovery

8
9

Defendants challenge the fraud claims as barred by California's the three-year

10

limitations period for fraud and fault the FAC's allegations of delayed discovery to revive the

11

fraud claims.

12

defendants' wrongdoing to preserve the fraud claims.

Plaintiffs contend that the FAC adequately alleges delayed discovery of

13

California Code of Civil Procedure section 338(d) ("section 338(d)") provides that a

14

fraud claim "is not deemed to have accrued until the discovery, by the aggrieved party, of the

15

facts constituting the fraud."

16

Under the discovery rule, “the limitations period does not accrue until the aggrieved

17

party has notice of the facts constituting the injury.” E-Fab, Inc. v. Accountants, Inc. Services,

18

153 Cal.App.4th 1308, 1318, 64 Cal.Rptr.3d 9 (2007). “The ‘discovery rule’ . . . assumes that

19

the elements of accrual including harm exist, but tolls the ru[nn]ing of the statute until the

20

plaintiff is on inquiry notice of its injury (and its wrongful cause).” California Sansome Co. v.

21

U.S. Gypsum, 55 F.3d 1402, 1406 (9th Cir. 1995). The discovery rule "is based on the notion

22

that statutes of limitations are intended to run against those who fail to exercise reasonable care

23

in the protection and enforcement of their rights; therefore, those statutes should not be

24

interpreted so as to bar a victim of wrongful conduct from asserting a cause of action before he

25

could reasonably be expected to discover its existence." Saliter v. Pierce Brothers Mortuaries,

26

81 Cal.App.3d 292, 297, 146 Cal.Rptr. 271 (1978).

27

To rely on delayed discovery of a claim, “[a] plaintiff whose complaint shows on its

28

face that his claim would be barred without the benefit of the discovery rule must specifically
17

1

plead facts to show (1) the time and manner of discovery and (2) the inability to have made

2

earlier discovery despite reasonable diligence.” Fox v. Ethicon Endo-Surgery, Inc., 35 Cal.4th

3

797, 808, 27 Cal.Rptr.3d 661 (2005) (quoting McKelvey v. Boeing North American, Inc., 74

4

Cal.App.4th 151, 160, 86 Cal.Rptr.2d 645 (1999)).

5

To satisfy the time and manner of discovery requirement, a plaintiff must allege “facts

6

showing the time and surrounding circumstances of the discovery of the cause of action upon

7

which they rely.” Bennett v. Hibernia Bank, 47 Cal.2d 540, 563, 305 P.2d 20 (1956). “The

8

purpose of this requirement is to afford the court a means of determining whether or not the

9

discovery of the asserted invasion was made within the time alleged, that is, whether plaintiffs

10

actually learned something they did not know before.” Bennett, 47 Cal.2d at 563, 305 P.2d 20.

11

Moreover, “to adequately allege facts supporting a theory of delayed discovery, the

12

plaintiff must plead that, despite diligent investigation of the circumstances of the injury, he or

13

she could not have reasonably discovered facts supporting the cause of action within the

14

applicable statute of limitations period.” Fox, 35 Cal.4th at 809, 27 Cal.Rptr.2d 661. The

15

doctrine of delayed discovery requires a plaintiff to plead facts showing an excuse for late

16

discovery of the facts underlying his cause of action. Prudential Home Mortgage Co. v.

17

Superior Court, 66 Cal.App.4th 1236, 1247, 78 Cal.Rptr.2d 566 (1998). The plaintiff must

18

show that it was not at fault for failing to discover or had neither actual nor presumptive

19

knowledge of facts sufficient to put it on inquiry. Prudential Home, 66 Cal.App.4th at 1247,

20

78 Cal.Rptr.2d 566. As to sufficiency of delayed discovery allegations, a plaintiff bears the

21

burden to “show diligence” and “conclusory allegations” will not withstand dismissal. Fox, 35

22

Cal.4th 797, 808, 27 Cal.Rptr.2d 661.

23
24
25
26
27
28

The FAC lacks facts to support delayed discovery for the fraud claims. The FAC's
facts and inferences are that:
1.

In 2006, plaintiffs paid $1.35 million in 2006 thinking that they were obtaining

50 percent ownership in Chandi & Sons and Chandi Brothers;
2.

In July 2007, Mr. Singh for Chandi & Sons and Chandi Brothers provided

plaintiffs the COI to note that plaintiffs' monies had been invested in Chandi & Sons and
18

1

Chandi Brothers;

2

3.

In July 2008, the terms of plaintiffs' investment culminated in the promissory

3

note, providing for $8,933 monthly interest payment but no due date for the balloon payment;

4

and

5
6

4.

Despite Mr. Singh's explanations and threats, plaintiffs accepted defendants'

varying payments up to January 2013.

7

The FAC does not allege that plaintiffs inquired into or demanded their purported stock

8

certificates or other evidences of ownership in Chandi & Sons and Chandi Brothers. The FAC

9

lacks sufficient facts that plaintiffs were unable to discover alleged fraud despite reasonable

10

diligence. There are no facts of plaintiffs' reasonable diligence in that the FAC's inferences are

11

that plaintiffs had accepted the arrangement culminating in the promissory note and payments

12

up to January 2013. The FAC no less than suggests that as of the July 15, 2008 promissory

13

note, plaintiffs knew or with reasonable diligence should have known that they were not

14

owners of Chandi & Sons and Chandi Brothers and that defendants used plaintiffs' monies in

15

return for interest and other payments. "[P]laintiffs are required to conduct a reasonable

16

investigation after becoming aware of an injury, and are charged with knowledge of the

17

information that would have been revealed by such an investigation.” Fox, 35 Cal.4th at 807–

18

808, 27 Cal.Rptr.3d 661.

19

The FAC alleges that as of January 2010, plaintiffs were aware of Mr. Singh's alleged

20

refinancing difficulties and "asked for their funds back." The FAC's facts and inferences are

21

that despite Mr. Singh's threats to stop payments, plaintiffs accepted their arrangement with

22

him and allowed him to operate. No later than January 2010, plaintiffs were aware of facts of

23

infringement on their rights but knowingly chose not to act. When "a party defrauded has

24

received information of facts which should put him upon inquiry, and the inquiry if made

25

would disclose the fraud, he will be charged with a discovery as of the time the inquiry would

26

have given him knowledge.” Victor Oil Co. v. Drum, 184 Cal. 226, 240, 193 P. 243 (1920.)

27

Plaintiffs' reliance on the Doan plaintiffs' litigation is misplaced and disconnected to

28

their fraud allegations. Although the Doan plaintiffs' litigation may have confirmed that
19

1

plaintiffs were not owners of Chandi & Sons and Chandi Brothers, alleged facts learned from

2

the Doan plaintiffs' litigation do not demonstrate that plaintiffs were prevented to learn of

3

defendants' alleged fraud. Allegations of as to the Doan plaintiffs' litigation merely references

4

when plaintiffs decided to take action, at a time when payments to them stopped. Moreover,

5

the FAC fails to connect how Doan litigation facts relate to plaintiffs' fraud claims. Despite

6

similarity of plaintiffs' and the Doan plaintiffs' complaints against defendants, they entered into

7

separate arrangements not including each other.

8

In sum, nearly all of the alleged fraud arose no less than four years prior to plaintiffs'

9

filing this action. Neither the FAC nor the record demonstrates plaintiffs' reasonable diligence

10

to no less than inquire into what they claim is fraud. The FAC reveals the opposite of

11

plaintiff's diligence and reasonable care and that they had accepted their arrangement with

12

defendants until the payments stopped.
Fraudulent Concealment

13
14

Plaintiffs appear to base the (seventh) fraudulent concealment claim on defendants'

15

failure "to disclose vital facts," including the Chandis' roles in and sales of assets of Chandi &

16

Sons and Chandi Brothers. Putting aside the limitations defense, defendants fault the absence

17

of facts to support a fraudulent concealment claim.

18

Because "nondisclosure is a claim for misrepresentation in a cause of action for fraud, it

19

(as any other fraud claim) must be pleaded with particularity under Rule 9(b)." Kearns v. Ford

20

Motor Co., 567 F.3d 1120, 1127 (9th Cir. 2009).

21

A claim for fraudulent concealment requires that:

22

1.

The "defendant must have concealed or suppressed a material fact;"

23

2.

The "defendant must have been under a duty to disclose the fact to the

24

plaintiff;"

25

3.

26
27
28

The "defendant must have intentionally concealed or suppressed the fact with

the intent to defraud the plaintiff;"
4.

The "plaintiff must have been unaware of the fact and would not have acted as

he did if he had known of the concealed or suppressed fact;" and
20

1

5.

As a result of the concealment or suppression of the fact, "the plaintiff must

2

have sustained damage.”

3

Davis v. HSBC Bank Nevada, N.A., 691 F.3d 1152, 1163 (9th Cir. 2012) (quoting Marketing

4

West, Inc. v. Sanyo Fisher (USA) Corp., 6 Cal.App.4th 603, 7 Cal.Rptr.2d 859, 864 (1992)).

5

The FAC lacks facts to support the fraudulent concealment claim which appears to

6

generalize plaintiffs' fraud allegations and to attempt to address delayed discovery. Because of

7

the FAC's ambiguity, the FAC reveals no defined duty owed to plaintiffs, especially since

8

plaintiffs' arrangement with defendants culminated in the vague promissory note. There are no

9

facts to demonstrate how plaintiffs would have acted differently had they known of concealed

10

facts, especially given their years of acquiescence in their arrangement. The FAC's facts and

11

inferences are that plaintiffs were content with their arrangement during the time that they

12

received payments. To the extent the fraudulent concealment claim seeks to enhance delayed

13

discovery, it fails, as discussed above.
Federal Securities Fraud

14

The FAC purports to allege three (seventh through ninth) federal securities claims

15
16

based on apparent failure to register securities and fraudulent sales.

17

dismissed with leave to amend the original complaint's California securities fraud claims and

18

barred addition of new claims without this Court's order. Plaintiffs fail to explain how the

19

federal securities claims are the same as the original complaint's California securities fraud

20

claims to warrant the federal securities claims' inclusion in the FAC. This Court construes

21

plaintiffs' failure to justify the federal securities claims as the same as the California securities

22

fraud claims as disobedience of the June 12 order to warrant dismissal of the federal securities

23

claims.

24

The June 12 order

Insufficient Pleading

25

The FAC lacks particularized facts to support federal securities fraud. There are no

26

facts that the purported securities, apparently shares in Chandi & Sons and Chandi Brothers,

27

are subject to the federal securities laws cited in the FAC. At most, the FAC reflects that

28

Chandi & Sons and Chandi Brothers are closely held and whose shares are not traded publicly
21

1

to invoke federal regulation relied upon by plaintiffs. There are no particularized allegations

2

that the alleged securities were in connection with a national securities exchange to require

3

their registration. See 15 U.S.C. § 78l. The federal securities fraud claims also appear to rely

4

on insider trading prohibitions which are not at issue under the FAC's facts. See 15 U.S.C. §

5

78t-1.

6

Moreover, federal securities claims must satisfy F.R.Civ.P. 9(b) particularity

7

requirements. See In re Daou Systems, Inc., 411 F.3d 1006, 1014 (9th Cir. 2005). The basic

8

elements of a Rule 10b-5 claim are: "(1) a material misrepresentation or omission of fact, (2)

9

scienter, (3) a connection with the purchase or sale of a security, (4) transaction and loss

10

causation, and (5) economic loss." Daou Systems, 411 F.3d at 1014.

11

A securities fraud complaint must “plead with particularity both falsity and scienter.”

12

See Daou Systems, 411 F.3d at 1104. Such complaint must "specify each statement alleged to

13

have been misleading, the reason or reasons why the statement is misleading, and, if an

14

allegation regarding the statement or omission is made on information and belief, the

15

complaint shall state with particularity all facts on which that belief is formed.” Gompper v.

16

VISX, Inc., 298 F.3d 893, 895 (9th 2002) (quoting 15 U.S.C. § 78u-4(b)(1)).

17

The complaint must also “state with particularity facts giving rise to a strong inference

18

that the defendant acted with the required state of mind.” Gompper, 298 F.3d at 895 (quoting

19

15 U.S.C. § 78u-4(b)(2)); see also In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 974

20

(9th Cir.1999) (facts must come closer to demonstrating intent as opposed to mere motive and

21

opportunity). The stricter standard for pleading scienter naturally results in a stricter standard

22

for pleading falsity, because “‘falsity and scienter in private securities fraud cases are generally

23

strongly inferred from the same set of facts,’ and the two requirements may be combined into a

24

unitary inquiry . . .” In re Vantive Corp. Sec. Litig., 283 F.3d 1079, 1091 (9th Cir.2002)

25

(quoting Ronconi v. Larkin, 253 F.3d 423, 429 (9th Cir. 2001).

26

A federal securities fraud claim requires an untrue statement or omission of material

27

fact “in connection with the purchase or sale of any security.” Basic Inc. v. Levinson, 485 U.S.

28

224, 231, 108 S.Ct. 978 (1988). To satisfy the “in connection with the purchase or sale of any
22

1

security” requirement, “the misrepresentation or omission must pertain to the securities

2

themselves; allegations of fraud merely involving securities are not sufficient.” Bissell v.

3

Merrill Lynch & Co., Inc., 937 F.Supp. 237, 242 (S.D.N.Y. 1996). “[U]nless the alleged fraud

4

concerns the value of the securities bought or sold, or the consideration received in return, such

5

fraud is not ‘in connection with’ the purchase or sale of a security.”

6

242.

Bissell, 937 F.Supp. at

7

The FAC alleges no more than purported fraud merely involving securities and fails to

8

establish necessary elements with particularized facts. There are no allegations as to the value

9

of the purported securities.

The FAC's facts and inferences are that plaintiffs' financial

10

arrangement culminated in the promissory note, not a securities transaction.

11

plaintiffs may have contemplated receipt of shares in Chandi & Sons and Chandi Brothers, the

12

FAC's facts and inferences are that plaintiffs' arrangement morphed into something else and

13

facts giving rise to a purported securities claim passed nearly seven years ago. Plaintiffs'

14

attempt to create a securities transaction by submitting dozens of exhibits merely burdens the

15

record and this Court with no apparent supporting rationale. The federal securities claims fail.

16

Inspection Of Books And Records

17
18
19
20
21
22
23
24
25
26
27
28

Although

The FAC's eleventh claim proceeds against all defendants and appears to seek
inspection of "the accounting books and records and minutes" of Chandi & Sons.
California Corporations Code section 1601(a) entitles shareholders to inspect corporate
records:
The accounting books and records and minutes of proceedings of the
shareholders and the board and committees of the board of any domestic corporation,
and of any foreign corporation keeping any such records in this state or having its
principal executive office in this state, shall be open to inspection upon the written
demand on the corporation of any shareholder or holder of a voting trust certificate at
any reasonable time during usual business hours, for a purpose reasonably related to
such holder's interests as a shareholder or as the holder of such voting trust certificate.
The FAC's twelfth claim proceeds against all defendants and appears to seek inspection
of "the accounting books and records and minutes" of Chandi Brothers.
California Corporations Code section 17106(a) entitles members of limited liability
23

1

corporations to inspect records:

5

Upon the request of a member or a holder of an economic interest, for purposes
reasonably related to the interest of that person as a member or a holder of an economic
interest, a manager shall promptly deliver, in writing, to the member or holder of an
economic interest, at the expense of the limited liability company, a copy of the
information required to be maintained by paragraphs (1), (2), and (4) of subdivision (a)
of Section 17058, and any written operating agreement of the limited liability company.

6

Defendants contend that plaintiffs are not entitled to inspect Chandi & Sons' records in

7

that the FAC reveals that plaintiffs' arrangement culminated in the promissory note to render

8

plaintiffs creditors, not shareholders or members. Defendants further contend that plaintiffs'

9

inspection rights are barred by the four-year limitations period of California Code of Civil

10

Procedure sections 343 (relief not otherwise provided for) in that the FAC fails to allege when

11

plaintiffs made a written demand for inspection.

2
3
4

12

Defendants raise valid points to which plaintiffs offer no meaningful opposition.

13

Although the FAC alleges that plaintiffs believed they would become Chandi & Sons and

14

Chandi Brothers shareholders, the FAC's facts and inferences are that plaintiffs acquiesced to

15

an arrangement that culminated in the promissory note to render plaintiffs no more than

16

debtors. The FAC lacks facts of plaintiffs' written or other request to review corporate records

17

to support the inspection claims. Moreover, such omission suggests the inspection claims are

18

susceptible to limitations defenses to further defeat the inspection claims. The inspection

19

claims are subject to dismissal.

20

Elder Abuse

21

In disobedience of the June 12 order, the FAC adds a (thirteenth) elder abuse claim that

22

defendants "engaged in deceptive and fraudulent practices whereby they knew that Plaintiffs

23

were senior citizens and they causing [sic] them to invest their life savings in order to defraud

24

them out of such funds" to entitle plaintiffs to treble damages under California Civil Code

25

section 3345(b).

26

June 12 Order's Bar To Add Claims

27

Plaintiffs' original complaint lacked an elder abuse claim. The June 12 order barred

28

addition of new claims, such as the elder abuse claim, without this Court's order. Plaintiffs'
24

1

unexplained disobedience of the June 12 order warrants dismissal of the elder abuse claim.

2

In addition, the elder abuse claim is insufficiently pled. Based on plaintiffs' opposition,

3

the elder abuse claim appears based on Mr. Singh's attempt to compel plaintiffs to persuade the

4

Doan plaintiffs to drop their litigation. Plaintiffs attribute Mr. Singh to state that if plaintiffs

5

did not convince the Doan plaintiffs to settle, plaintiffs "will lose the sole source of income."

6

California Welfare & Institutions Code section 15610.30(a) defines "financial abuse" to

7

include taking, secreting, appropriating, obtaining, or retaining real or personal property of an

8

elder, age 65 or older, "for a wrongful use or with intent to defraud, or both," or assisting in

9

such conduct. The elder abuse statutes address conduct that results in taking, etc. of an elder's

10

property. The FAC facts and inferences are that defendants had taken plaintiffs' money years

11

prior to Mr. Singh's alleged threat in December 2012 and that plaintiffs' arrangement

12

culminated in the promissory note in July 2008 at a time at which the FAC is silent whether

13

plaintiffs were age 65 or older to qualify as elders. The FAC lacks sufficient facts to support

14

an elder abuse claim, and plaintiffs offer no meaningful legal authority of the claim.
CONCLUSION AND ORDER

15
16

For the reasons discussed above, this Court:

17

1.

18

DISMISSES with prejudice the (first) breach of contract claim against Mr.

Singh and Chandi Brothers;

19

2.

DISMISSES with prejudice the (second) breach of fiduciary duty claim;

20

3.

DISMISSES with prejudice the (third) fraud-intentional, (fourth) negligent

21

misrepresentation, (fifth) false promise and (sixth) concealment claims;
4.

23
24
25

DISMISSES with prejudice the (seventh through ninth) federal securities

5.

22

DISMISSES with prejudice the (eleventh and twelfth) corporate records

claims;

inspection claims; and

26

6.

DISMISSES with prejudice the (thirteenth) elder abuse claim.

27

Based on the dismissed claims, the FAC's remaining claims are limited to the (first)

28

breach of contract against Chandi & Sons only and the (tenth) involuntary dissolution claim
25

1

against Chandi & Sons and Chandi Brothers only. As such, this Court:
1.

2

DISMISSES with prejudice this action and all claims against Mr. Singh and the

3

Chandis and directs the clerk to enter judgment in favor of defendants Nirmal Singh,

4

Nachhattar Chandi, Susana Chandi and Valley Petroleum, Inc. and against plaintiffs Jagjeevan

5

Dhaliwal and Mohinder Gill in that there is no just reason to delay to enter such judgment

6

given that plaintiffs' claims against Mr. Singh, the Chandis and Valley Petroleum and their

7

alleged liability are clear and distinct from claims against and liability of other defendants. See

8

F.R.Civ.P. 54(b); and
2.

9
10

ORDERS the Chandi & Sons and Chandi Brothers, no later than September 4,

2013, to file and serve a F.R.Civ.P. 7(a)(2) answer to the FAC.

11
12
13
14

IT IS SO ORDERED.

15
16
17

Dated:

/s/ Lawrence J. O’Neill

August 16, 2013

UNITED STATES DISTRICT JUDGE
DEAC_Signature-END:

66h44d

18
19
20
21
22
23
24
25
26
27
28
26