In Re Robert A. Ferrante

• Court: District Court, C.D. California
• Decided: December 6, 2022
• Docket: 8:22-cv-01087
• Status: Unknown

Opinion

Case 8:22-cv-01087-MWF Document 19 Filed 12/06/22 Page 1 of 15 Page ID #:2543

1 JS-6 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 CENTRAL DISTRICT OF CALIFORNIA 8 SANTA ANA DIVISION 9 IN RE: ROBERT A. FERRANTE CASE NO. SACV 22-1087-MWF 10 11 ORDER RE: APPEAL FROM 12 BANKRUPTCY COURT’S 13 AMENDED ORDER GRANTING TRUSTEE’S MOTION TO DISMISS 14 SECOND AMENDED ADVERSARY 15 COMPLAINT WITH LEAVE TO AMEND 16 17 Before the Court is an appeal from the United States Bankruptcy Court for the 18 Central District of California (the Honorable Theodor C. Albert, Chief United States 19 Bankruptcy Judge), in Estate of William L. Seay et al. v. Thomas H. Casey, SACV 20 19-ap-01131, an adversary proceeding related to Chapter 7 action In re Robert A. 21 Ferrante, SACV 10-bk-10310. Appellant Nancy Klein Seay, as Trustee for the 22 William L. Seay Trust, appeals the Bankruptcy Court’s order issued on December 9, 23 2021 (“Amended Order”). (Appellant’s Excerpts of Record (“ER”) 0042). The 24 Amended Order alters the Bankruptcy Court’s prior dismissal order of the Trustee’s 25 Motion to Dismiss the Second Amended Complaint (“SAC”), issued on October 19, 26 2022 (“Prior Dismissal Order”), in that it provides Appellant leave to file a Third 27 28 1 Case 8:22-cv-01087-MWF Document 19 Filed 12/06/22 Page 2 of 15 Page ID #:2544

1 Amended Complaint. (ER 365). The Prior Dismissal Order dismissed the SAC in 2 its entirety, without leave to amend. 3 Appellant appealed the Prior Dismissal Order to this Court. On September 3, 4 2021, this Court issued an order affirming dismissal of the SAC but remanded the 5 matter to the Bankruptcy Court “to consider whether any of Appellant’s grounds for 6 rescission – fraud in particular – could possibly be cured on amendment by the 7 allegation of other facts.” ((“Appellate Order”) (ER 827)). On remand, consistent 8 with those instructions, and after extensive briefing, the Bankruptcy Court amended 9 its Prior Dismissal Order, granting Appellant leave to amend, on December 9, 2022. 10 (ER 42-43). 11 On January 28, 2022, Appellant filed a Notice of Non-Amendment (the 12 “Notice”), indicating that she would not be filing an amended complaint. (ER 37). 13 In the Notice, Appellant asserted that she believes “that the existing complaint states 14 valid claims for relief” and that the Amended Order “imposed constraints and 15 sanctions warnings that effectively deny [Appellant] any meaningful opportunity to 16 satisfy the concerns which led the court to dismiss the complaint.” (ER 37-40). 17 This appeal followed, in which Appellant argues that the Bankruptcy Court’s 18 constraints and warnings were an abuse of discretion. 19 Appellant filed her opening brief (“OB”) on September 19, 2022. (Docket 20 No. 16). Appellee Thomas H. Casey, Chapter 7 Trustee for the Bankruptcy Estate 21 of Robert A. Ferrante, filed his responsive brief (“RB”) on October 19, 2022. 22 (Docket No. 17). Appellant filed her reply brief (“ARB”) on November 2, 2022. 23 (Docket No. 18). 24 The Court read and considered the papers on the Motion and deemed the 25 matter appropriate for decision without oral argument. See Fed. R. App. P. 26 34(a)(2)(C) (noting that appeals may be decided without oral argument if the “facts 27 and legal arguments are adequately presented in the briefs and record, and the 28 decisional process would not be significantly aided by oral argument.”). 2 Case 8:22-cv-01087-MWF Document 19 Filed 12/06/22 Page 3 of 15 Page ID #:2545

1 The Amended Order is AFFIRMED. Appellant has waived any right to 2 amend — let alone an unrestricted right to amend — by filing this appeal instead of 3 taking advantage of the leave that was granted by the Bankruptcy Court. Further, on 4 its face, the Amended Order does not actually impose any official conditions in its 5 grant of leave to amend. Finally, even if language in the opinion attached to the 6 Amended Order could be construed as imposing conditions, the Bankruptcy Court 7 did not abuse its discretion by requiring Appellant to allege new facts to support her 8 rescission theory and to provide an explanation as to why such allegations were not 9 previously set forth. 10 I. BACKGROUND 11 The Court has previously summarized the background of this action in 12 connection with the Appellate Order. The Court incorporates by reference the 13 factual background set forth in that Order. Nonetheless, the Court will briefly 14 address the procedural background and relevant proceedings on remand, which have 15 led to this appeal. 16 A. The Parties 17 On January 11, 2010, Robert A. Ferrante (the “Debtor”) filed for Chapter 7 18 bankruptcy under Title 11 of the United States Code. In re Ferrante, Case No. 8:10- 19 bk-10310-TA (Bankr. C.D. Cal. Jan. 11, 2010). Thomas H. Casey (“Appellee”) was 20 thereafter appointed Trustee for the Bankruptcy Estate of the Debtor. (ER 515). 21 Appellant, the successor in interest to the late Lt. Col. William L. Seay, U.S.M.C. 22 (Ret.) (“Col. Seay”), is a creditor in the underlying bankruptcy proceeding. (Id. at 23 515). In 2004, Col. Seay secured and recorded a final judgment against the Debtor 24 in the principal amount of $2,417,057.16, which created an automatic lien on all real 25 property interests of Debtor whether fixed or contingent, legal or equitable, present 26 or future (the “Seay Lien”). (Id.) 27 28 3 Case 8:22-cv-01087-MWF Document 19 Filed 12/06/22 Page 4 of 15 Page ID #:2546

1 B. The Agreement 2 On April 7, 2014, Appellee and Col. Seay entered into a written contract 3 structured as a “carve out” agreement (the “Agreement”), relating to the Seay Lien 4 on the Debtor’s Newport Property. (ER 517). The Agreement expressly provided 5 that Col. Seay would defer 50% of the sums to which he was entitled under his Lien 6 to be later recouped from recoveries in Appellee’s Adversary Action. (ER 519). 7 The Agreement obligated the Estate to pay Col. Seay the deferred amount from the 8 proceeds of litigation recoveries, plus fees and costs, and all remaining amounts 9 under his judgment lien. (ER 520). The Agreement imposed on Appellee the 10 corresponding obligation to actively litigate the Adversary Action in order to obtain 11 sufficient recovery to pay back the sums that Col. Seay agreed to carve out and 12 subordinate under the Agreement. (ER 519). 13 C. The Adversary Complaint 14 On July 3, 2019, Appellant filed an Adversary Complaint against Appellee 15 seeking restitution and claiming the Agreement had been unilaterally rescinded. 16 (ER 803). 17 On August 2, 2019, Appellee filed a motion to dismiss the Adversary 18 Complaint on several grounds, including that Appellant’s claims were barred by the 19 doctrines of quasi-judicial immunity, and constituted collateral attacks on the 20 properly entered orders of the bankruptcy court. (Appellee’s Supplemental 21 Excerpted Record (“SER”) at 1). In response, on August 22, 2019, Appellant filed 22 the First Amended Complaint (“FAC”). (ER 710). Appellee filed a motion to 23 dismiss the FAC. (Id. at 671). On June 10, 2020, the Court dismissed the FAC and 24 granted Appellant leave to amend. (Id. at 595). The Bankruptcy Court’s rationale 25 was that Appellee is entitled to quasi-judicial immunity in his individual capacity 26 and may only be sued in his representative capacity. (Id. at 607). The Bankruptcy 27 Court further ruled that some of Appellant’s allegations, such as those related to 28 undue influence, duress, and menace, were barred by the doctrine of judicial 4 Case 8:22-cv-01087-MWF Document 19 Filed 12/06/22 Page 5 of 15 Page ID #:2547

1 estoppel. (Id.). The Bankruptcy Court provided leave to amend in order to afford 2 Appellant a chance to plead fraud with the requisite particularity under Federal Rule 3 9. (Id.). 4 On August 9, 2020, Appellant filed the SAC. (Id. at 481). The SAC brings 5 three claims for relief against Appellee in his representative capacity: (1) restitution 6 after completed unilateral rescission; (2) common count for money had and 7 received; and (3) declaratory and injunctive relief. By its own terms, the SAC 8 makes clear that Appellant believes the Agreement has been rescinded based on the 9 following grounds: 10 (i) Col. Seay’ s consent to the contract was obtained by duress, 11 menace, fraud, and undue influence exercised by or with the 12 connivance of Appellee; 13 (ii) the consideration for Col. Seay’s promise failed in whole or 14 in part, through the fault of Appellee; 15 (iii) the consideration for Col. Seay’s promise failed from any 16 cause before it was rendered to him; 17 (iv) the contract was entered into due to a mutual mistake of 18 material fact and law by the parties concerning the 518 Trust; 19 and 20 (v) the contract is against public policy because the Newport 21 Property was fully encumbered. Appellee’s administration of 22 such an asset violates the Justice Department Guidelines and 23 public policy as promulgated by the Office of the United 24 States Trustee unless the agreement returns a meaningful 25 dividend to unsecured creditors. 26 (ER 510 (SAC ¶ 93)). 27 The SAC alleges that Appellant is entitled to restitution of the deferred Seay 28 proceeds from the sale of the Newport Property. (Id. (SAC ¶ 94)). 5 Case 8:22-cv-01087-MWF Document 19 Filed 12/06/22 Page 6 of 15 Page ID #:2548

1 D. The Prior Dismissal and Appellate Order 2 On October 12, 2020, the Bankruptcy Court granted Appellee’s motion to 3 dismiss the SAC in its entirety finding each ground for rescission implausible. The 4 Bankruptcy Court further determined that because Appellant’s accounting and 5 declaratory relief claims are entirely dependent on her First Claim for restitution 6 (premised on a theory of rescission), the Second and Third Claims should be 7 dismissed as well. Finally, the Bankruptcy Court decided not to grant Appellant 8 leave to amend, concluding that “it is extremely unlikely that Plaintiff will be able to 9 make any new arguments that would move the needle[,]” and “[t]he court has 10 already expressed its skepticism that there is really anything here besides a bitterly 11 disappointed plaintiff.” (ER 365). 12 On September 3, 2021, this Court affirmed the Bankruptcy Court’s dismissal 13 of the SAC in its entirety. (Id. at 826). This Court remanded the matter to the 14 Bankruptcy Court with instructions to “consider whether any of Appellant’s grounds 15 for rescission — fraud in particular — could possibly be cured on amendment by the 16 allegation of other facts.” (Id. at 842). Consistent with those instructions, the 17 Bankruptcy Court, after extensive briefing, granted Appellant leave to amend the 18 complaint a third time. 19 On January 28, 2022, Appellant filed a Notice of Non-Amendment, indicating 20 that she would not file an amended complaint. (ER 37). 21 E. Grounds for Appeal 22 Appellant contends that “the conditions the [Bankruptcy C]ourt placed on the 23 amendment were sufficiently onerous as to constitute an abuse of discretion 24 rendering the right to amend order granting leave to file an amended complaint an 25 empty one.” (OB at 8). Appellant complains that the Bankruptcy Court’s 26 “fundamental legal and factual errors,” made satisfaction of the conditions 27 “impossible and unfairly limited Appellant’s freedom to craft the amendment to best 28 satisfy any concerns regarding the sufficiency of the pleading.” (Id. at 8-9). As for 6 Case 8:22-cv-01087-MWF Document 19 Filed 12/06/22 Page 7 of 15 Page ID #:2549

1 the purported “conditions,” Appellant cites to language in the opinion attached to 2 the Amended Order, which noted that in any amended complaint, Appellant should 3 “allege new facts (not the same facts repackaged) that would plausibly sustain 4 [Appellant’s] rescission theory.” (ER 74) (emphasis in original). Appellant also 5 argues that the Bankruptcy Court improperly “warned of sanctions” in its statement 6 that: 7 If there are new facts that could support plausible causes of action . . . 8 why were they not set forth in the initial three complaints or even in the 9 most recent briefs? [Appellant] should consider very carefully about 10 how to proceed, as amendment without significant changes with 11 appropriate explanation will be riding the line of frivolous litigation. In 12 sum, [Appellant] should put all cards on the table one last time and 13 show the court what it missed. 14 (Id.). 15 Appellant also seemingly takes issue with this Court’s remand instructions in 16 the Appellate Order, claiming that the instructions are “impossible to satisfy no 17 matter how many amendments are permitted” because, according to Appellant, this 18 Court instructed the Bankruptcy Court to determine whether her “claim for 19 rescission” could possibly be saved by the inclusion of other facts. (OB at 21). 20 Appellant contends that this is problematic because “the SAC does not have a claim 21 for rescission in it” and a claim for rescission is not possible under state law. (Id.). 22 Appellant further contends that the Bankruptcy Court made a fundamental legal 23 error when it noted that “whether rescission is a remedy or cause of action, in the 24 end is not of much consequence.” (Id. at 13) (citing ER 0072). 25 The Court notes that Appellant makes several other irrelevant arguments in 26 her moving papers. But there is one, and only one, issue on appeal; whether the 27 Bankruptcy Court abused its discretion in placing so-called conditions on its grant of 28 leave to amend the SAC. Therefore, the Court does not entertain any arguments that 7 Case 8:22-cv-01087-MWF Document 19 Filed 12/06/22 Page 8 of 15 Page ID #:2550

1 either continue to rehash matters previously decided by this Court or that attempt to 2 advance novel theories of recovery. Those issues are simply not the issue on appeal 3 and the Court rejects any attempt by Appellant to use this appeal as a vehicle to 4 unravel this Court’s prior Appellate Order. 5 II. STANDARD OF REVIEW 6 The Court has jurisdiction to hear appeals from final judgments, orders, and 7 decrees of the bankruptcy court. 28 U.S.C. § 158(a). When considering an appeal 8 from the bankruptcy court, a district court uses the same standard of review that a 9 circuit would use in reviewing a decision of a district court. See In re Baroff, 105 10 F.3d 439, 441 (9th Cir. 1997). 11 A court’s denial of an opportunity to amend a pleading is reviewed for abuse 12 of discretion. Sharkey v. O’Neal, 778 F.3d 767, 774 (9th Cir. 2015) (citing Foman 13 v. Davis, 371 U.S. 178, 182 (1962)). 14 III. DISCUSSION 15 As an initial matter, a review of the record indicates that Appellant was 16 granted leave to amend the SAC without substantive restraint. The Amended Order 17 granting Appellee’s Motion to Dismiss the SAC states: “IT IS HEREBY 18 ORDERED that: Plaintiff is granted leave to file Third Amended Complaint within 19 thirty (30) days of entry of this Order for the reasons set forth in the Court’s 20 Ruling.” (ER 44). Notably, while the Amended Order references the “reasons” 21 provided in the court’s “ruling” for allowing leave to amend, the Amended Order 22 does not state that Appellant’s leave to amend was formerly restricted in any fashion 23 beyond a time limit. Therefore, Appellee is correct in noting that this entire appeal 24 is based on nothing more than dicta, in the form of guidance to aid Appellant’s 25 efforts to cure the deficiencies in the SAC. (See RB at 10). 26 The Court finds instructive Lloyd v. Sears Bank & Tr. Co., 67 Ill. App. 3d 27 141, 145, 384 N.E. 2d 742 (1978), where the plaintiff made virtually identical 28 arguments that were readily rejected by an Illinois appellate court. There, the trial 8 Case 8:22-cv-01087-MWF Document 19 Filed 12/06/22 Page 9 of 15 Page ID #:2551

1 court’s order granting the motion to dismiss granted leave to amend and merely 2 provided a date upon which the plaintiff had to comply. Id. On appeal, the plaintiff 3 argued that “the trial judge abused his discretion when, during hearing, he indicated 4 that he would only allow an amendment, seeking an accounting” and by 5 “threat[ening] to impress sanctions if [the plaintiff’s] amendment sought the same 6 relief.” Id. The appellate court noted that while it was “difficult to determine 7 whether the trial judge was ruling out any other theory of recovery,” the order “did 8 not impose any restrictions on its face.” Id. Since the plaintiff failed to file an 9 amended complaint, the court determined that “it [was] pure conjecture for [the 10 plaintiff] to forecast what the trial court would have done had an amended complaint 11 been filed.” Id. Moreover, the appellate court determined that “[a]bsent the filing 12 of an amended complaint,” it was “powerless to review the exercise of discretion by 13 the trial judge.” Id. 14 Here too, the Court views Appellant’s arguments concerning the Bankruptcy 15 Court’s purported conditions on any amendment to the SAC as nothing more than 16 “pure conjecture” over how an amended complaint may have been received by the 17 Bankruptcy Court if it had been filed. See id. But Appellant waived any right to 18 amend — let alone any right to an unrestricted amendment — by filing a Notice 19 indicating her intent not to amend. See Rick–Mik Enters. v. Equilon Enters, LLC, 20 532 F.3d 963, 977 (9th Cir. 2008) (refusing to allow plaintiff to amend where 21 plaintiff chose to appeal decision rather than amend); Garfield v. NDC Health 22 Corp., 466 F.3d 1255, 1260-61 (11th Cir. 2006) (“By filing an appeal in this 23 manner, however, DeKalb elected to stand on its Second Amended Complaint and 24 waived its right to further amendment.”). Given that waiver, this Court concludes 25 that it is likely “powerless to review the exercise of discretion” by the Bankruptcy 26 Court. See Lloyd, 67 Ill. App. 3d at 145. 27 Nonetheless, out of an abundance of caution, and in the absence of directly 28 analogous binding authority, the Court will consider whether there was an abuse of 9 Case 8:22-cv-01087-MWF Document 19 Filed 12/06/22 Page 10 of 15 Page ID #:2552

1 discretion, assuming the Bankruptcy Court actually imposed the so-called 2 conditions, and further assuming Appellant is entitled to appeal such conditions 3 without first exercising the leave granted to amend the SAC. 4 As far as the Court can discern, there appears to be three interrelated 5 “conditions” that Appellant believes were imposed by the Bankruptcy Court on her 6 leave to amend the SAC: (1) that Appellant allege “new facts;” (2) that those facts 7 be limited to supporting a “claim for rescission;” and (3) that Appellant include an 8 adequate explanation as for why such facts have not been previously set forth in 9 prior complaints (or else risk sanctions). (See OB 20, 21). Because Appellant’s 10 moving papers are most centrally concerned with the second condition, the Court 11 deals with that argument first. 12 The thrust of Appellant’s appeal is that she has never pled a rescission claim, 13 cannot plead such a claim under California law, and therefore, any amended 14 “rescission claim” would inevitably fail. (Id. at 13). But nothing in the Amended 15 Order can legitimately be read as restricting Appellant to amend the SAC based on a 16 “claim for rescission.” (OB at 21). 17 While the opinion attached to the Amended Order states in its conclusion that 18 the court will “[a]llow an amended complaint containing a rescission theory as 19 outlined above,” the mention of rescission in that sentence is a reference to the 20 arguments advanced by Appellant, it is not a restriction on the scope of any 21 amended complaint. (ER 74) (emphasis added). Appellant has repeatedly insisted 22 that because the Agreement has been rescinded, she is entitled to restitution. Indeed, 23 the SAC alleges that her claims are based on a theory of rescission at least twenty 24 times. (See ER 481-513 (SAC)). Therefore, it should come as no surprise to 25 Appellant that she was granted leave to amend her rescission theory – since that is 26 the primary theory that she has alleged throughout the course of this controversy. 27 And Appellant misquotes this Court’s Appellate Order when she states that it 28 “instructed the court below to determine whether [Appellant’s] ‘claim for rescission’ 10 Case 8:22-cv-01087-MWF Document 19 Filed 12/06/22 Page 11 of 15 Page ID #:2553

1 could possibly be saved by the inclusion of other facts.” (OB at 21). In reality, this 2 Court stated: “to consider whether any of Appellant’s grounds for rescission – fraud 3 in particular – could possibly be cured on amendment by the allegation of other 4 facts.” (ER 827) (emphasis added). 5 It is true that rescission, on its own, is not a cause of action under California 6 law. No one — neither this Court, nor the Bankruptcy Court, nor Appellee — has 7 ever suggested otherwise. But Appellant continues to latch on to that unremarkable 8 statement of law for a conclusion that it simply does not support. 9 According to Appellant, because rescission is not a “cause of action” (but 10 only a “remedy”) under California law, courts do not have any authority to 11 determine whether a party’s claim of rescission is valid. (See OB at 13, 21-23). 12 Wrong. While certain out-of-court conduct (i.e., notice and tendering of any 13 consideration received) is necessary to effectuate a valid rescission, out-of-court 14 conduct is not sufficient if a party seeks further relief. To obtain relief for a claimed 15 contract rescission, the party must bring “an action to recover any money or thing 16 owing to him by any other party to the contract as a consequence of such rescission 17 or for any other relief to which he may be entitled under the circumstances.” Little 18 v. Pullman, 219 Cal. App. 4th 558, 568, 162 Cal. Rptr. 3d 74 (2013) (citing Civil 19 Code § 1692). As the California Court of Appeal explained in Little: 20 [A]lthough a party need not seek relief upon rescission if he does not 21 want any—he can try to walk away—if he does want relief, as [the 22 plaintiff] does here, he must bring an action to obtain it or assert the 23 rescission by way of defense or cross-complaint. In any such action, 24 the trial court will determine not only whether rescission was effected 25 but also whether it was justified, and thereafter grant appropriate relief. 26 (Id. at 569) (emphasis added). 27 In other words, just because a party claims a contract has been rescinded does 28 not make it so. Several courts have rejected a party’s claim that a contract had been 11 Case 8:22-cv-01087-MWF Document 19 Filed 12/06/22 Page 12 of 15 Page ID #:2554

1 rescinded due to that party’s failure to plead or prove any of the statutory grounds 2 for rescission. See, e.g., Koenig v. Warner Unified Sch. Dist., 41 Cal. App. 5th 43, 3 60, 253 Cal. Rptr. 3d 576 (2019) (“We therefore reject Koenig’s claim that he was 4 entitled to rescind the termination agreement because the consideration failed in a 5 material respect before it was rendered to him.”); Moser v. Encore Cap. Grp., Inc., 6 455 F. App’x 745, 747 (9th Cir. 2011), as amended (Nov. 17, 2011) (“The district 7 court did not err with respect to rescission [because] Moser did not identify a 8 statutory basis for rescission.”) (citing Cal. Civ. Code § 1689); Chaganti v. Ceridian 9 Benefits Servs., Inc., 208 F. App’x 541, 545 (9th Cir. 2006) (“The district court 10 correctly rejected Chaganti’s contention that the Release should be rescinded 11 because Sun breached its terms.”). 12 In sum, while rescission is not a cause of action, a party seeking to “enforce a 13 rescission,” must sufficiently plead, as part of its claim for restitution or other relief, 14 that there are statutory grounds for rescission. (See OB at 22); see also Nmsbpcsldhb 15 v. Cnty. of Fresno, 152 Cal. App. 4th 954, 959, 61 Cal. Rptr. 3d 425 (2007) (“A party 16 to a contract cannot rescind at his pleasure, but only for some one or more of the 17 causes enumerated in section 1689 of the Civil Code.”). 18 Therefore, because it is Appellant that insists that she is entitled to relief based 19 on the fact that Col. Seay rescinded the contract, the Amended Order simply noted 20 that Appellant was granted leave to amend to establish one of the grounds that would 21 entitle her to rescission (and restitution thereafter). Contrary to Appellant’s assertion 22 that the Bankruptcy Court misstated the law, this Court wholly agrees with the 23 Bankruptcy Court’s statement that, for purposes of determining the proper scope of 24 an amended complaint, “whether rescission is a remedy or cause of action, in the end 25 is not of much consequence.” (OB at 13) (citing ER 0072). 26 Accordingly, the Bankruptcy Court did not abuse its discretion in referencing 27 Appellant’s “rescission theory” in its grant of leave to amend. 28 12 Case 8:22-cv-01087-MWF Document 19 Filed 12/06/22 Page 13 of 15 Page ID #:2555

1 It was also well within the Bankruptcy Court’s authority to instruct Appellant 2 to allege new facts in an amended complaint. Specifically, in the opinion attached to 3 the Amended Order, the Bankruptcy Court stated: 4 [G]iving all benefit of the doubt to [Appellant], this court is inclined to 5 grant [Appellant] one additional leave to amend the complaint to allege 6 new facts (not the same facts repackaged) that would plausibly sustain 7 [Appellant’s] rescission theory. To be clear, the District Court affirmed 8 the dismissal, so only new facts and theories for relief plausibly based 9 thereon in an amended complaint can defeat a motion to dismiss. 10 (ER 74) (emphasis in original). 11 The Bankruptcy Court’s statement was clearly not intended as a restriction on 12 Appellant’s freedom to amend but as an instruction to Appellant as to how to 13 overcome yet another dismissal. Such an instruction was proper given the Ninth 14 Circuit has made clear that it is not an abuse of discretion to deny a motion to 15 amend a complaint where the moving party proposing amendment presents “no new 16 facts” or simply restates prior insufficient claims. See Bonin v. Calderon, 59 F.3d 17 815, 845 (9th Cir. 1995); Loos v. Immersion Corp., 762 F.3d 880 (9th Cir. 2014) 18 (holding that the district court did not abuse its discretion in dismissing claims 19 without leave to amend where the plaintiff did not correct the deficiencies identified 20 in his original complaint, the court gave a detailed explanation to the plaintiff as to 21 why his original theory was deficient, but plaintiff essentially re-pled the same facts 22 and legal theories in his amended complaint); Fidelity Financial Corp. v. Federal 23 Home Loan Bank of San Francisco, 792 F.2d 1432 (9th Cir. 1986) (similar). 24 And even if the statement about new facts was a formal restriction on 25 Appellant’s ability to amend the SAC, Appellant does not cite any authority to 26 suggest that such a restriction would be improper. Courts routinely impose 27 restrictions when they grant leave to amend a complaint. See, e.g., Smallwood v. 28 Fed. Bureau of Investigation, No. 16-00505 DKW-KJM, 2016 WL 4974948, at *6 13 Case 8:22-cv-01087-MWF Document 19 Filed 12/06/22 Page 14 of 15 Page ID #:2556

1 (D. Haw. Sept. 16, 2016) (“If Smallwood chooses to file an amended complaint, he 2 is STRONGLY CAUTIONED that he must clearly identify the basis for this 3 Court’s subject matter jurisdiction.”) (emphasis in original); Corrales v. Vega, No. 4 ED CV 12-01876 JVS R, 2015 WL 575961, at *3 (C.D. Cal. Feb. 11, 2015) 5 (dismissing complaint “with specified leave to amend as to Claim 3” and instructing 6 the plaintiff how to improve the claim) (emphasis in original); Kuntz v. New York 7 State Bd. of Elections, 924 F. Supp. 364, 366 (N.D.N.Y. 1996), aff'd sub nom. Kuntz 8 v. New York State Senate, 113 F.3d 326 (2d Cir. 1997) (noting that courts “act[] 9 well within [their] discretion in placing [] limitations on amendments made by its 10 leave” particularly where there has already been “lengthy litigation history” and 11 “substantial time and expense” by the defendant “in answering and moving against 12 plaintiff’s first inadequately drafted [c]omplaint.”); see also 6 Fed. Prac. & Proc. 13 Civ., Amendments With Leave of Court—Conditions Imposed on Leave to Amend, § 14 1486 (3d ed.) (“The statement in Rule 15(a)(2) that the court ‘should freely give 15 leave when justice so requires’ presupposes that the court may use its discretion to 16 impose conditions on the allowance of a proposed amendment as an appropriate 17 means of balancing the interests of the party seeking the amendment and those of 18 the party objecting to it.”). 19 Finally, Appellant’s argument regarding the Bankruptcy Court’s warning 20 against frivolous litigation likewise fails. The Bankruptcy Court merely urged 21 Appellant to “consider very carefully about how to proceed, as amendment without 22 significant changes with appropriate explanation would be riding the line of 23 frivolous litigation.” (ER 74). As Appellee notes, this admonishment was 24 consistent with Rule 11, as made applicable by Federal Rule of Bankruptcy 25 Procedure 7011. (RB at 10); cf. Equitable Life Assurance Soc'y v. Alexander Grant 26 & Co., 627 F. Supp. 1023, 1033 (S.D.N.Y. 1985) (dismissing complaint and 27 warning the plaintiff to “carefully consider its duty under Rule 11” if it chose to file 28 amended complaint). Moreover, the Ninth Circuit has noted that lower courts do 14 Case (8:22-cv-01087-MWF Document 19 Filed 12/06/22 Page 15o0f15 Page ID #:2557

1 || not “abuse [their] discretion in denying a motion to amend a complaint” when the 2 || movant “provided no satisfactory explanation for [the] failure to fully develop his 3 || contentions originally.’” Nunes v. Ashcroft, 375 F.3d 805, 808 (9th Cir. 2004) 4 || (quoting Vincent v. Trend W. Technical Corp., 828 F.2d 563, 570-71 (9th Cir. 5 || 1987). 6 Accordingly, not one of the “conditions” (assuming they can be characterized 7 ||as such) imposed on the Appellant in filing a Third Amended Complaint was an 8 || abuse of the Bankruptcy Court’s discretion. The Amended Order is AFFIRMED. 9 Given Appellant waived her right to amend by filing this appeal, the 10 || Bankruptcy Court shall enter judgment dismissing the SAC in its entirety without 11 || leave to amend and with prejudice. 12 13 IT IS SO ORDERED. 14 15 DATED: December 6, 2022 oo j iM MICHAEL W. FITZGERALD 18 United States District Judge 19 20 1 CC: Bankruptcy Court 22 23 24 25 26 27 28 15