Furst v. Mayne

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 Robert G Furst, No. CV-21-01287-PHX-DLR

10 Plaintiff, ORDER

11 v.

12 Linda Mayne, et al.,

13 Defendants. 14 15 16 Pending before the Court are Defendants Linda Mayne and Stephen S. Mayne’s1 17 motions to strike and to dismiss, which are fully briefed. (Docs. 20, 22, 23, 29, 36, 37.) 18 For the following reasons, the Court grants the motion to dismiss in part and denies the 19 motion to strike. 20 I. Background2 21 David Furst (“David”) and Hanna Furst (“Hanna”) had two children: Robert Furst 22 (“Mr. Furst”) and Linda Mayne (“Ms. Mayne”). David and Hanna established the Furst 23 Family Trust (“the Trust”), a revocable estate planning trust in which they were the 24 Trustors, the Co-Trustees, and the primary beneficiaries. David and Hanna also formed 25 1 Mr. Furst makes no claims against Stephen S. Mayne; instead, he is named as a 26 defendant merely for the purpose of binding the community estate. 2 The background comes entirely from the amended complaint at Docket #20. The 27 Court notes that this version of the complaint is simply titled “complaint.” In actuality, it is an amended complaint; the original was filed months earlier at Docket #1. For clarity, 28 the Court will refer to the complaint at Docket #20 as the amended complaint and the complaint filed at Docket #30 as the second amended complaint. 1 DHF Corporation, in which David was the sole employee and both David and Hanna were 2 Co-Trustees of the DHF Corporation Profit Sharing Plan (“the Plan”). 3 As alleged by Mr. Furst, Ms. Mayne hoodwinked their parents by having them sign 4 several documents that (1) appointed Mr. Furst and Ms. Mayne as co-trustees of the Trust 5 in place of their parents, (2) appointed Mr. Furst and Ms. Mayne as co-trustees of the Plan 6 in place of their parents, and (3) granted Ms. Mayne durable financial power of attorney as 7 to both parents. Once both parents found out what they had signed, the family relationship 8 deteriorated. 9 A year later, David died. Hanna lived in an assisted living facility at that time. A 10 month later, Ms. Mayne contacted TD Ameritrade to freeze a little over a million dollars 11 in assets held there, effectively preventing re-investment for the benefit of Hanna or 12 distribution to her benefit. She used other assets in the Family Trust to pay for Hanna’s 13 living expenses. On occasion, she also used her personal funds to pay for Hanna’s living 14 expenses and reimbursed herself out of the Trust. 15 While Ms. Mayne was still co-trustee with Mr. Furst, she told him that he “should 16 pay the bills for [Hanna’s] living expenses, and then she [Ms. Mayne] would then write 17 checks to him from the Family Trust accounts to reimburse him.” But she never wrote 18 those checks, and $150,000 of cash advances went unreimbursed. 19 Mr. Furst now seeks to recover the unreimbursed payments from Ms. Mayne 20 personally under the theories of breach of fiduciary duty, common law fraud, and 21 constructive fraud. (Doc. 20.) Ms. Mayne has moved to dismiss the first amended 22 complaint for failure to state a claim, and also seeks to strike certain language from the first 23 amended complaint on the grounds that it is a personal attack irrelevant to the claims. 24 II. Discussion 25 A. The operative complaint 26 Defendants moved to dismiss Mr. Furst’s amended complaint on December 22, 27 2021. (Doc. 23.) On January 17, 2021, Mr. Furst filed three documents: (1) a response in 28 opposition to Defendants’ motion to dismiss (Doc. 29), (2) a second amended complaint 1 (Doc. 30), and (3) a notice of the filing of an amended complaint, together with a copy of 2 the second amended complaint showing the changes from its predecessor in redline (Doc. 3 31). Mr. Furst’s filing of a second amendment complaint has caused a stir because Mr. 4 Furst did not obtain leave of Court before filing it. After amending a complaint for the first 5 time, “a party may amend its pleading only with the opposing party’s written consent or 6 the court’s leave.” Fed. R. Civ. P. 15(a). Mr. Furst did not meet either requirement for 7 amending his complaint a second time. As such, the second amended complaint filed at 8 Docket #30 has no legal effect and will be stricken. The amended complaint filed at Docket 9 #20 remains operative. 10 With that said, the Court will not strike the notice and accompanying redlined 11 second amended complaint Mr. Furst filed at Docket #31. In his response in opposition to 12 Defendants’ motion to dismiss, Mr. Furst requests leave to amend in the event the Court 13 grants the motion. (Doc. 29 at 12.) Paragraph 3 of the Court’s standard order discouraging 14 motions to dismiss therefore required Mr. Furst to “submit, no later than the time [he] files 15 a response to the motion, a proposed amended complaint that complies with LRCiv 15.1(a) 16 and contains all further allegations [he] could make.” (Doc. 9 at 2.) The Court will treat 17 the notice filed at Docket #31 as serving this purpose. The notice operates as a proposed 18 second amended complaint, which assists the Court in determining whether leave to amend 19 would be futile. But the Court has not yet granted leave, and therefore Mr. Furst should 20 not have taken the additional step of actually filing his proposed second amended complaint 21 at Docket #30. 22 B. The motion to dismiss 23 1. Compliance with the Court’s standard order 24 Before reaching the merits of the motion to dismiss, the Court must address Mr. 25 Furst’s procedural challenge, which argues that the motion to dismiss is improper because 26 it flouts the Court’s standard order providing: 27 Any motion under Rule 12(b)(6) or 12(c) must certify the parties conferred in good faith but were unable to agree that the 28 complaint is curable by a permissible amendment. Motions 1 that do not contain the required certification may be stricken by the Court. 2 (Doc. 9 at 2.) Mr. Furst doesn’t argue that Defendants failed to include the certification in 3 their motion to dismiss; instead, he claims that “[n]o conference ever occurred” because 4 “Defendants’ counsel sent a letter demanding the dismissal of all claims, with prejudice, 5 and stated that, if all claims were not dismissed, he would file a Motion to Strike and a 6 Motion to Dismiss.” (Doc. 29 at 2.) Mr. Furst was free to respond to that letter and confer. 7 Either he did not, or he did.3 Regardless, any failure at conferring falls on his head because 8 Defendants satisfied their obligations under the standard order by sending a letter and an 9 email, which “explain[ed] to [Mr. Furst] the reasons why Defendant[s] believe[] the 10 complaint fails to state a claim for relief,” and invited Mr. Furst to discuss “whether any of 11 the deficiencies identified by Defendant[s] can be cured through an amended complaint.” 12 (Doc. 9 at 2; see Doc. 37-1 at 4-6.) The Court’s standard order imposes bilateral 13 obligations, and Defendants complied with theirs. 14 2. Standard 15 To survive a Rule 12(b)(6) motion to dismiss, a complaint must contain factual 16 allegations sufficient to “raise a right to relief above the speculative level.” Bell Atl. Corp. 17 v. Twombly, 550 U.S. 544, 555 (2007). A complaint fails this “if it tenders ‘naked 18 assertion[s]’ devoid of ‘further factual enhancement.” Gilmore v. DJO Inc., 663 F. Supp. 19 2d 856, 859 (D. Ariz. 2009) (quoting Twombly, 550 U.S. at 555)). The task when ruling 20 on a motion to dismiss “is to evaluate whether the claims alleged [plausibly] can be asserted 21 as a matter of law.” Adams v. Johnson, 355 F.3d 1179, 1183 (9th Cir. 2004); accord 22 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). When analyzing the sufficiency of a 23 complaint, the well-pled factual allegations are taken as true and construed in the light most 24 favorable to the plaintiff. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). 25

27 3 Defendants note that they possess a copy of Mr. Furst’s email response, which they declined to submit into evidence because of some allegedly “vicious and defamatory 28 attacks against Mrs. Mayne.” (Doc. 37 at 13.) Although the Court need not parse this email to resolve the issue at hand, it notes that most modern computers enable redaction. 1 3. Election of remedies 2 Ms. Mayne’s first argument invokes the election of remedies doctrine, which 3 “precludes pursuit of two inconsistent remedies based on the same claim.” Cal X-Tra v. 4 W.V.S.V. Holdings, L.L.C., 276 P.3d 11, 30 (Ariz. Ct. App. 2012) (quoting Phillips v. Adler, 5 657 P.2d 893, 895 (Ariz. Ct. App. 1982)). For instance, a plaintiff cannot claim both fraud 6 and breach of contract against the same defendant for the same action. Id. (quoting 7 Jennings v. Lee, 461 P.2d 161, 165 (Ariz. 1969)). When two defendants are at play, 8 however, the matter is more complicated. “[A] plaintiff who has alternative substantive 9 rights against two persons and by pursuing a substantive right against one person, that 10 pursuit acts as a ratification of the wrongful act of the other, the plaintiff is precluded from 11 subsequently pursuing his remedy against the wrongdoer whose act was ratified.” Hennesy 12 Equip. Sales Co. v. Valley Nat. Bank, 543 P.2d 123, 124 (Ariz. 1975). 13 Here’s how it played out in Hennesy. A Hennesy employee forged checks drawn 14 on Hennesy’s account at Valley National Bank. Id. at 124. Hennesy sued the employee 15 for fraud, obtaining a recovery, and then sued the bank for breach of contract. Id. Just as 16 here, the bank argued that Hennesy had elected its remedy when it sued the employee and 17 could not turn right around and sue the bank. Id. The court disagreed. It found that two 18 separate wrongs had befallen the plaintiff: breach of contract by the bank by “relinquishing 19 money” absent the signed authority of the plaintiff and (2) interference with the contractual 20 relationship between the bank and the plaintiff by the forger. Id. at 126. In other words, 21 wrongs that sounded in contract and tort, respectively. Id. Thus, the court concluded that 22 “[t]wo wrongs had been done the [plaintiff] and he should not be precluded from pursuing 23 two consistent substantive rights arising from these harms.” Id. 24 The circumstances here are not different. Mr. Furst first sued the Trust in state court, 25 seeking the promised reimbursement of the funds he advanced the Trust for Hanna’s care; 26 he was not successful. Mr. Furst now sues Ms. Mayne for fraud for the funds he advanced 27 the Trust at her behest. Just as in Hennesy, the wrongs are different. Against the trust, Mr. 28 Furst has a claim that sounds in contract. Against Ms. Mayne personally, Mr. Furst has a 1 claim that sounds in tort. Thus, the doctrine of election of remedies does not bar his fraud 2 claims against Ms. Mayne, although “this does not mean . . . that two recoveries can be 3 had.” Id. “When that damage has been satisfied, either by being made whole by the 4 [defrauder] or by the [trust], the [plaintiff] can collect no more.” Id. 5 4. Personal tort liability of a trustee 6 In Arizona, “[a] trustee is personally liable for torts committed in the course of 7 administering a trust or for obligations arising from ownership or control of trust property, 8 including liability for violation of environmental law, only if the trustee is personally at 9 fault.” A.R.S. § 14-11010 (emphasis added). Intentional torts, however, by virtue of being 10 intentional, impose personal duties. Wells Fargo Bank v. Arizona Laborers, Teamsters & 11 Cement Masons Loc. No. 395 Pension Tr. Fund, 38 P.3d 12, 22 (Ariz. 2002), as corrected 12 (Apr. 9, 2002) (“[I]t would be anomalous to invoke a lack of a specific duty in dismissing 13 a complaint for an intentional act. . . . The duty, if it must be so named, is obviously to 14 refrain from intentional harm to others. At the level of intent, reference to duty becomes . 15 . . needlessly academic. . . .” (alterations in original)). Consequently, a person may not 16 avoid a claim of fraud merely because of trusteeship; even in such capacity, a person owes 17 a personal duty to “refrain from intentional harm to others.” Id. 18 The same is not true for the breach of fiduciary duty, which is not an intentional tort. 19 Mr. Furst does not allege that Ms. Mayne owed him a fiduciary duty in a personal capacity. 20 Instead, the fiduciary duty, as he alleges, arises out of her role as trustee. (Doc. 20 at 13.) 21 Mr. Furst argues that a “confidential relationship” between him and his sister grounds the 22 breach of fiduciary duty claim. But a claim for breach of fiduciary duty requires proof that 23 “a fiduciary duty existed.” Goodman v. Dohmen, 964 F.3d 798, 801-02 (9th Cir. 2019). 24 And in Arizona, fiduciary relationships and confidential relationships are different animals 25 altogether; one cannot take the other’s stead. Rindlisbacher v. Steinway & Sons Inc., 497 26 F. Supp. 3d 479, 504 (D. Ariz 2020). Mr. Furst alleges no facts that show Ms. Mayne owed 27 a fiduciary duty to Mr. Furst in her personal capacity; therefore she cannot be liable under 28 the breach of fiduciary duty claim. 1 5. The elements of fraud 2 Ms. Mayne next argues that Mr. Furst has not pled that Ms. Mayne was “the 3 proximate and consequent cause of [his] alleged injury,” as required for a fraud claim. 4 “The proximate cause of an injury is that which, in a natural and continuous sequence, 5 unbroken by any efficient intervening cause, produces an injury, and without which the 6 injury would not have occurred.” McDowell v. Davis, 448 P.2d 869, 871 (Ariz. 1968). Her 7 argument goes like this: Mr. Furst was damaged when the Trust failed to reimburse him, 8 “not by any alleged action or inaction of Mrs. Mayne,” thereby breaking the causal chain. 9 (Doc. 23 at 14.) But Mr. Furst alleged that Ms. Mayne refused to reimburse him out of the 10 Trust accounts, over which she had control and which she promised to do. Mr. Furst 11 sufficiently pled that Ms. Mayne was the proximate and consequent cause of his alleged 12 injury. 13 6. Leave to amend 14 In compliance with the Court’s standard order, Mr. Furst filed a proposed, redlined 15 second amended complaint alongside his response to the motion to dismiss, in which he 16 seeks leave to amend if the Court dismisses the operative complaint. (Docs. 29, 31-1.) But 17 here, the Court dismisses only a portion of his operative complaint—that which alleges a 18 breach of fiduciary duty claim against Ms. Mayne in her personal capacity. The Court 19 therefore will analyze the propriety of amendment based on this claim alone. 20 Leave to amend should be freely granted “when justice so requires.” Fed. R. Civ. 21 P. 15(a). The Court considers four factors when determining whether leave to amend is 22 appropriate: bad faith, undue delay, prejudice to the opposing party, and futility. 23 AmerisourceBergen Corp. v. Dialysist West, Inc., 465 F.3d 946, 951 (9th Cir. 2006). 24 Futility alone justifies denying a motion for leave to amend. Bonin v. Calderon, 59 F.3d 25 815, 845 (1995). A motion to amend is futile if the amended portion fails to state a 26 plausible claim for relief. Chabrowski ex rel. ARTBE Enters., LLC v. Litwin, No. CV-16- 27 03766-PHX-DLR, 2017 WL 2841212, at *2 (D. Ariz. Jan. 19, 2017). 28 1 With respect to the breach of fiduciary duty claim, the proposed amended complaint 2 has the same deficiency as its predecessor: the breach of fiduciary duty claim entirely 3 hinges on Ms. Mayne serving as trustee and is devoid of any “facts to support any personal 4 obligation” by Ms. Mayne. This particular amendment therefore is futile and leave to 5 amend is denied. 6 C. Motion to strike 7 Under Rule 12(f), a district court “may strike from a pleading an insufficient defense 8 or any redundant, immaterial, impertinent, or scandalous matter.” But the Court generally 9 disfavors Rule 12(f) motions. Barnes v. AT&T Pension Ben. Plan-Nonbargained 10 Program, 718 F. Supp. 2d 1167, 1170 (N.D. Cal. 2010); XY Skin Care & Cosmetics, LLC 11 v. Hugo Boss USA, Inc., No. CV-08-1467-PHX-ROS, 2009 WL 2382998, at *1 (D. Ariz. 12 Aug. 4, 2009); Wailua Associates v. Aetna Cas. And Sur. Co., 183 F.R.D. 550, 553-54 (D. 13 Haw. 1998) (“Matter will not be stricken from a pleading unless it is clear that it can have 14 no possible bearing upon the subject matter of the litigation.”). 15 Ms. Mayne seeks to strike from the amended complaint several allegations related 16 to Mr. Furst’s academic and professional successes, Ms. Mayne’s comparatively fewer 17 successes and greater missteps, and how she got Hanna and David to sign documents 18 related to the Trust. (Doc. 22 at 6-8.) These allegations all relate to whether Ms. Mayne 19 has the present intent that Mr. Furst act on the allegedly false promise. Mr. Furst’s theory 20 is that it is more likely that Ms. Mayne would attempt to defraud her brother when she 21 harbored deep-seated resentment about their comparatively different successes and 22 purportedly unequal love from parents. (Doc. 20 at 3.) And second, the alleged trickery 23 explains why the whole family became “a united front” against her, making it more likely 24 that she’d attempt to defraud Mr. Furst. The Court cannot say that these allegations have 25 no possible bearing on the subject matter of the litigation. The motion to strike is denied. 26 IT IS ORDERED as follows: 27 1. Mr. Furst’s unauthorized second amended complaint (Doc. 30) is STRICKEN. 28 1 2. Defendants’ motion to dismiss (Doc. 23) is GRANTED in part. The breach of 2 fiduciary duty claim is dismissed. The fraud and constructive fraud claims may 3 proceed. 4 3. Defendants’ motion to strike (Doc. 22) is DENIED. 5 Dated this 11th day of August, 2022. 6 7 : Los Ue 10 Upited States Dictric Judge 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

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