Parra v. Parra

• Court: District Court, S.D. California
• Decided: May 20, 2021
• Docket: 3:20-cv-00839
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 ADAM M. PARRA, Trustee of the Laura Case No.: 20-cv-839-DMS-JLB E. Parra Revocable Trust Dated 12 September 9, 1994, as amended, ORDER (1) GRANTING 13 DEFENDANTS’ MOTION TO Plaintiff, DISMISS, (2) GRANTING THIRD- 14 v. PARTY DEFENDANTS’ MOTION 15 TO DISMISS, AND (3) GRANTING JUDITH ERIKA PARRA, an individual; DEFENDANTS’ MOTION FOR 16 ERIKA PARRA, Trustee of the Judith LEAVE TO FILE COUNTERCLAIM Erika Parra and Jose Miguel Parra Trust 17 dated March 13, 2020, and DOES 1-10, 18 inclusive, 19 Defendants. 20 JUDITH ERIKA PARRA, an individual; 21 ERIKA PARRA, Trustee of the Judith Erika Parra and Jose Miguel Parra Trust 22 dated March 13, 2020; ERIKA PARRA in 23 her capacity as Executor of the Estate of Jose Miguel Parra, 24 Third-Party Plaintiffs, 25 v. 26 TERESA M. GILLIS, an individual, and 27 the LAW OFFICE OF TERESA M. 28 1 GILLIS, a California entity, and ZOES 1- 25, inclusive, 2 Third-Party Defendants. 3 4 5 Pending before the Court are two motions to dismiss Plaintiff’s First Amended 6 Complaint (“FAC”): one filed by Defendants Judith Erika Parra and Erika Parra as Trustee 7 of the Judith Erika Parra and Jose Miguel Parra Trust dated March 13, 2020 8 (“Defendants”), and one filed by Third-Party Defendants Teresa M. Gillis and the Law 9 Office of Teresa M. Gillis (“Third-Party Defendants”). Also pending before the Court is 10 Defendants’ motion for leave to file a counterclaim. The motions have been fully briefed. 11 For the following reasons, the Court grants the motions to dismiss, and grants the motion 12 for leave to file a counterclaim. 13 I. 14 BACKGROUND 15 This case arises out of a dispute regarding the real property at 6731 Vigo Drive, La 16 Mesa, California 91942 (the “Property”),1 which was owned by the Laura Parra Revocable 17 Trust (the “LP Trust”). (FAC ¶¶ 9–10.) Laura Parra, the settlor of the LP Trust, died on 18 March 1, 2020. (Id. ¶ 11.) Plaintiff Adam M. Parra is Laura Parra’s son, and upon her 19 death, he assumed the office of Trustee of the LP Trust, pursuant to the terms of the LP 20 Trust. (Id.) The LP Trust named as beneficiaries Laura Parra’s two children, Plaintiff 21 Adam M. Parra and his brother Jose Miguel Parra (“Mike Parra”). (Id. ¶ 12.) The LP 22 Trust’s terms directed Plaintiff to sell the Property and distribute the net sale proceeds to 23 the trust’s beneficiaries. (Id. ¶ 13.) 24 25

26 1 The Property has the following legal description: “Lot 92 of Rolando Knolls, Unit No. 5, 27 in the County of San Diego, State of California, according to map thereof No. 2492, filed in the Office of the County Recorder of San Diego County, December 17, 1952. (FAC 28 1 At the time of Laura Parra’s death, Mike Parra was terminally ill. On or about March 2 13, 2020, Mike Parra and his wife, Judith Erika Parra (“Erika Parra”), established a trust 3 (the “JEP Trust”). (Id. ¶ 14.) On or about March 30, 2020, Mike Parra executed a grant 4 deed purporting to transfer the Property to the JEP Trust (“the Grant Deed”). (Id. ¶ 15.) 5 Plaintiff alleges Mike Parra did not own the Property nor have any interest in it when the 6 Grant Deed was executed. (Id. ¶ 16.) Shortly thereafter, on April 3, 2020, Mike Parra died 7 and Erika Parra became sole trustee of the JEP Trust. (Id. ¶ 17.) On April 6, 2020, the 8 Grant Deed was recorded in the Office of the San Diego County Recorder. (Id. ¶ 18; Ex. 9 2 to Decl. of Rochelle J. Bioteau.)2 10 Based on these alleged facts, Plaintiff filed this diversity action on May 4, 2020.3 11 (ECF No. 1.) On July 29, 2020, the Court issued an order cancelling the Grant Deed 12 pursuant to the joint motion of the parties. (Order Granting Joint Mot. for Cancellation of 13 Deed, ECF No. 11.) In October of 2020, the Property was sold to a third-party buyer, a 14 fact which the parties do not dispute, notwithstanding the FAC’s allegation that the 15 Property is still owned by the LP Trust. (Ex. 6 to Decl. of Rochelle J. Bioteau, ECF No. 16 45-2; see FAC ¶ 10).4 On December 16, 2020, Defendants filed a Third-Party Complaint 17 against Teresa M. Gillis and the Law Office of Teresa M. Gillis, whom Mike and Erika 18 Parra had retained for estate planning purposes, alleging claims for professional 19 negligence, breach of contract, and breach of fiduciary duty. (ECF No. 26.) 20 On February 16, 2021, Plaintiff filed a First Amended Complaint (“FAC”), alleging 21 claims for quiet title, fraud, and violation of California Probate Code § 859. (ECF No. 39.) 22

23 2 The Court takes judicial notice of the Grant Deed as a public record. See Fed. R. Evid. 201; Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001) (at motion to dismiss 24 stage, “a court may take judicial notice of ‘matters of public record’”). 25 3 There is complete diversity between the parties—Plaintiff is a citizen of Arizona, and Defendants are citizens of California—and the amount in controversy exceeds $75,000. 26 (FAC ¶ 7.) 27 4 The Court takes judicial notice of Exhibit 6 to the Declaration of Rochelle J. Bioteau, which exhibit is a grant deed executed by Plaintiff, conveying the Property to Andrew J. 28 1 Plaintiff seeks injunctive and declaratory relief, damages, costs, and attorneys’ fees. 2 Defendants and Third-Party Defendants each filed a motion to dismiss Plaintiff’s FAC on 3 March 10, 2021. (ECF Nos. 44, 45.) On March 26, 2021, Defendants filed their Answer 4 to the FAC, a Counterclaim, and a motion for leave to file counterclaim. (ECF Nos. 47, 5 48, 49.) 6 II. 7 DISCUSSION 8 A. Defendants and Third-Party Defendants’ Motions to Dismiss 9 Defendants and Third-Party Defendants each move to dismiss Plaintiff’s FAC, 10 which alleges five causes of action. Plaintiff’s fourth and fifth causes of action, which are 11 claims for injunctive and declaratory relief, respectively, are remedies, not causes of action, 12 and the Court construes these allegations accordingly. See Marlin v. Aimco Venezia, LLC, 13 64 Cal. Rptr. 3d 488, 494–95 (Cal. Ct. App. 2007); Kimball v. Flagstar Bank F.S.B., 881 14 F. Supp. 2d 1209, 1219 (S.D. Cal. 2012). The Court addresses Plaintiff’s argument 15 regarding the timing of Defendants’ motion before turning to whether Plaintiff has 16 plausibly pled claims for quiet title, fraud, and violation of California Probate Code § 859. 17 1. Legal Standard 18 A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the 19 legal sufficiency of the claims asserted in the complaint. Fed. R. Civ. P. 12(b)(6); Navarro 20 v. Block, 250 F.3d 729, 731 (9th Cir. 2001). In deciding a motion to dismiss, all material 21 factual allegations of the complaint are accepted as true, as well as all reasonable inferences 22 to be drawn from them. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 338 (9th Cir. 1996). 23 A court, however, need not accept all conclusory allegations as true. Rather, it must 24 “examine whether conclusory allegations follow from the description of facts as alleged by 25 the plaintiff.” Holden v. Hagopian, 978 F.3d 1115, 1121 (9th Cir. 1992) (citation omitted). 26 A motion to dismiss should be granted if a plaintiff’s complaint fails to contain “enough 27 facts to state a claim to relief that is plausible.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 28 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that 1 allows the court to draw the reasonable inference that the defendant is liable for the 2 misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 3 U.S. at 556). 4 Under Federal Rule of Civil Procedure 14(a), a third-party defendant “may assert 5 against the plaintiff any defense that the third-party plaintiff has to the plaintiff’s claim.” 6 Fed. R. Civ. P. 14(a)(2)(C). “While the plaintiff and the third-party defendant are not 7 opposing parties, Rule 14 recognizes the derivative nature of the third-party defendant’s 8 potential liability and permits it essentially to stand in the defendant’s shoes and assert its 9 defenses . . . .” Beaver v. Tarsadia Hotels, 315 F.R.D. 346, 349 (S.D. Cal. 2016) (internal 10 quotation marks and citation omitted). 11 2. Timing of Defendants’ Motion 12 As a threshold matter, Plaintiff asserts that Defendants’ present motion to dismiss 13 under Rule 12(b)(6) is procedurally improper because Defendants previously filed an 14 answer to Plaintiff’s original Complaint. Plaintiff argues the motion should be denied and 15 that Defendants must file a motion for judgment on the pleadings instead. 16 Generally, a “Rule 12(b)(6) motion must be made before the responsive pleading.” 17 Elvig v. Calvin Presbyterian Church, 375 F.3d 951, 954 (9th Cir. 2004) (citing Fed. R. Civ. 18 P. 12(b)(6)). However, the Ninth Circuit has yet to address whether a Rule 12(b)(6) motion 19 may be brought to challenge an amended complaint by a defendant who previously filed 20 an answer to the original complaint. “[M]any other circuits and district courts across the 21 country . . . have held that an amended complaint does not revive the right to file a post- 22 answer motion to dismiss, with the exception that new claims may be attacked.” Brooks v. 23 Caswell, No. 3:14-CV-01232-AC, 2016 WL 866303, at *3 (D. Or. Mar. 2, 2016); see 24 Pascal v. Concentra, Inc., No. 19-CV-02559-JCS, 2020 WL 4923974, at *2 (N.D. Cal. 25 Aug. 21, 2020) (“[A] defendant may bring a Rule 12(b) motion objecting to an amended 26 complaint only to the extent the challenges asserted in that motion are based on the new 27 matter in the amended complaint.”). Nevertheless, the court in Brooks noted that some 28 district courts have “exercised their discretion and entertained untimely post-answer 1 motions to dismiss on amended complaints for the sake of judicial economy.” 2016 WL 2 866303, at *4 (citing cases). 3 Here, between the filing of Plaintiff’s original complaint and the FAC, the Grant 4 Deed upon which Plaintiff’s claims are based was cancelled, and Plaintiff sold the Property 5 to a third-party buyer. (See ECF No. 11; Ex. 6 to Decl. of Rochelle J. Bioteau.) Defendants 6 rely upon these facts in support of their motion to dismiss and thus argue they should be 7 permitted to challenge the FAC by a Rule 12(b)(6) motion. Further, Defendants argue 8 because Third-Party Defendants have also filed a motion to dismiss, judicial economy 9 counsels that the Court should address both motions now, rather than require Defendants 10 to wait and file a motion for judgment on the pleadings. 11 “District courts in this circuit can treat improperly filed motions to dismiss as 12 motions for judgment on the pleadings,” Daimler AG v. A-Z Wheels LLC, No. 16-CV-875- 13 JLS (MDD), 2017 WL 9854427, at *2 (S.D. Cal. Nov. 27, 2017) (citing Aldabe v. Aldabe, 14 616 F.2d 1089, 1093 (9th Cir. 1980)), and a motion to dismiss and a motion for judgment 15 on the pleadings are analyzed under a substantially identical standard, see Chavez v. United 16 States, 683 F.3d 1102, 1108 (9th Cir. 2012) (internal quotation marks and citation omitted). 17 Given this analogous standard, the changed factual circumstances, and the judicial 18 economy considerations with respect to the Third-Party Defendants’ pending motion to 19 dismiss, the Court will address Defendants’ motion now. 20 3. Plaintiff’s Quiet Title Claim 21 “The purpose of a quiet title action is to finally settle and determine, as between the 22 parties, all conflicting claims to the property in controversy, and to decree to each such 23 interest or estate therein as he or she may be entitled to.” Deutsche Bank Nat’l Tr. Co. v. 24 Pyle, 220 Cal. Rptr. 3d 691, 699 (Cal. Ct. App. 2017) (internal quotation marks, citation, 25 and brackets omitted). To state a claim to quiet title, “the complaint shall be verified” and 26 must include all of the following: (1) a legal description of the property and its street 27 address or common designation; (2) the title of the plaintiff and the basis of the title; (3) the 28 adverse claims to the title of the plaintiff; (4) the date as of which the determination is 1 sought; and (5) a prayer for the determination of the title of the plaintiff against the adverse 2 claims. Cal. Code Civ. Proc. § 761.020. 3 Defendants and Third-Party Defendants argue Plaintiff fails to state a claim for quiet 4 title because there is no controversy over title. The Court agrees. 5 Plaintiff cannot state a claim for a determination of quiet title as of February 16, 6 2021, the day the FAC was filed, because at that time, the Grant Deed had already been 7 cancelled, eliminating any allegedly adverse claim by Defendants against the Property. See 8 West v. JPMorgan Chase Bank, N.A., 154 Cal. Rptr. 3d 285, 303 (Cal. Ct. App. 2013) 9 (holding plaintiff could not satisfy adverse claim element of quiet title where defendant no 10 longer had interest in the property); Colyear v. Rolling Hills Cmty. Assn. of Rancho Palos 11 Verdes, 9 Cal. App. 5th 119, 136, 214 Cal. Rptr. 3d 767, 781 (Cal. Ct. App. 2017) (holding 12 quiet title claim was moot because there was no adverse claim against plaintiff’s property 13 at the time FAC was filed). 14 However, under California’s quiet title statute, a plaintiff may seek a date of 15 determination other than the date the action was filed. Cal. Code Civ. Proc. § 761.020. 16 Here, Plaintiff seeks a quiet title determination as of March 13, 2020 (FAC ¶ 26),5 arguing 17 a controversy over title existed on the dates on which the Grant Deed was executed and 18 recorded. 19 Nevertheless, Plaintiff fails to establish that a present controversy exists as to title 20 on the dates in question. Even assuming the Grant Deed constituted an adverse claim 21 against the Property at the time it was recorded, it has since been cancelled by joint motion 22 of the parties. There is no dispute between the parties that Plaintiff had title to the Property 23 on the dates in question. Moreover, Plaintiff no longer has title to the Property and 24

25 5 Plaintiff concedes this date is an error and the correct dates for which he seeks a determination are March 30, 2020, and April 6, 2020, the dates the Grant Deed was 26 executed and recorded. (Pl.’s Opp’n to Defs.’ Mot. to Dismiss, ECF No 54, at 8; Pl.’s 27 Opp’n to Third-Party Defs.’ Mot. to Dismiss, ECF No 55, at 8–9.) In any event, Plaintiff’s FAC seeks a quiet title determination as of a date prior to the Grant Deed’s cancellation 28 1 Defendants do not presently claim an interest in the Property. Thus, Plaintiff’s quiet title 2 claim is moot because there is no active controversy and thus no need for declaratory relief. 3 See RGC Gaslamp, LLC v. Ehmcke Sheet Metal Co., 56 Cal. App. 5th 413, 433, 270 Cal. 4 Rptr. 3d 425, 444 (2020), review denied (Feb. 10, 2021) (finding “cause of action for quiet 5 title was moot” because “there was no longer an ‘active controversy’ for declaratory relief; 6 and injunctive relief was unnecessary”); Cal. Civ. Proc. Code § 1060 (declaratory relief 7 requires “actual controversy”). Accordingly, the Court dismisses this cause of action. 8 4. Fraud 9 The elements of a fraud claim are “(a) misrepresentation (false representation, 10 concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to 11 defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” Lazar 12 v. Superior Ct., 909 P.2d 981, 984 (Cal. 1996). Federal Rule of Civil Procedure 9(b) 13 imposes a heightened pleading standard on claims alleging fraud, requiring a plaintiff to 14 state with “particularity the circumstances constituting the fraud or mistake.” Fed. R. Civ. 15 P. 9(b); see Davidson v. Kimberly-Clark Corp., 889 F.3d 956, 964 (9th Cir. 2018); Vess v. 16 Ciba-Geigy Corp. USA, 317 F.3d 1097, 1103 (9th Cir. 2003) (“Rule 9(b)’s particularity 17 requirement applies to state-law causes of action.”). A plaintiff must set forth “the who, 18 what, when, where, and how of the misconduct charged.” Vess, 317 F.3d at 1106 (internal 19 quotation marks and citation omitted). 20 Here, Plaintiff fails to sufficiently plead a fraud claim. Plaintiff appears to allege 21 both that the Grant Deed itself was a false representation, and that Defendants made a 22 misrepresentation by concealing or failing to disclose the Grant Deed’s existence to 23 Plaintiff. Plaintiff claims Defendants “willfully and fraudulently transferr[ed] the 24 Property” via the Grant Deed, made a material misrepresentation by recording the Grant 25 Deed, and “concealed the fact of this fraudulent transfer” from Plaintiff. (FAC ¶¶ 28–30.) 26 Insofar as Plaintiff claims concealment or nondisclosure, he fails to allege that Defendants 27 had a duty to disclose the fact of the Grant Deed to him, or that Plaintiff “would not have 28 acted as he did if he had known of the concealed or suppressed fact.” Bank of Am. Corp. 1 v. Superior Ct., 130 Cal. Rptr. 3d 504, 509–10 (Cal. Ct. App. 2011) (setting forth elements 2 for fraud based on concealment); see Hoffman v. 162 N. Wolfe LLC, 175 Cal. Rptr. 3d 820, 3 826 (Cal. Ct. App. 2014); Foster v. Xerox Corp., 707 P.2d 858, 859 (Cal. 1985). 4 To the extent Plaintiff alleges the recording of the Grant Deed was itself a false 5 representation, Plaintiff’s assertions are contradictory. Plaintiff asserts “Defendants 6 intended for Plaintiff to rely on the fact that Plaintiff believed he was still the legal owner 7 of the Property.” (FAC ¶ 31.) But if the alleged false representation is that Defendants 8 owned the Property, as the Grant Deed purportedly indicated, it is unclear how such 9 misrepresentation would induce Plaintiff to rely on his own belief that he owned the 10 Property.6 The Court finds Plaintiff has not alleged with sufficient particularity the 11 circumstances of the fraud. Further, Plaintiff does not adequately plead how he relied on 12 any alleged misrepresentation, beyond mere conclusory allegations. Accordingly, the 13 Court dismisses this cause of action. 14 5. California Probate Code § 859 15 California Probate Code § 859 is a “punitive” statute which “provides for recovery 16 of twice the value of property taken in bad faith.” Est. of Kraus, 108 Cal. Rptr. 3d 760, 17 766 (Cal. Ct. App. 2010). The penalty is imposed “when an interested party establishes 18 both that the property in question is recoverable under section 850 and that there was a bad 19 faith taking of the property.” Id. 20 Here, Plaintiff cannot establish the Property is recoverable under California Probate 21 Code § 850. That section provides, in relevant part, that a trustee may file a claim for 22 recovery of property under one of the following circumstances: 23 24 25 6 Indeed, Plaintiff’s FAC indicates Plaintiff believed he was the legal owner of the Property 26 both prior to and after the Grant Deed’s recording. Plaintiff does not allege that he believed 27 at any point that Defendants owned the Property. Although Plaintiff alleges the Property was fraudulently transferred, he also alleges that the Grant Deed was void on its face, which 28 1 (A) Where the trustee is in possession of, or holds title to, real or personal property, and the property, or some interest, is claimed to belong to 2 another. 3 (B) Where the trustee has a claim to real or personal property, title to or possession of which is held by another. 4 (C) Where the property of the trust is claimed to be subject to a creditor 5 of the settlor of the trust. 6 Cal. Prob. Code. § 850(a)(3). The parties do not dispute that Plaintiff sold the Property to 7 a third-party buyer in October 2020. Thus, Plaintiff cannot plausibly plead that he 8 possesses, holds title to, or has a claim to the Property as required to state a claim for 9 recovery under Probate Code § 850. Because the Grant Deed was cancelled pursuant to 10 joint motion, Plaintiff further fails to plead that Defendants hold, or claim they hold, title 11 or possession to the Property. Nor does Plaintiff plead that any wrongful taking occurred. 12 Rather, the FAC alleges, and Defendants agree, that Plaintiff owned the Property at the 13 time the Grant Deed was recorded, and the Grant Deed was void on its face because Mike 14 Parra had no interest to convey. (FAC ¶ 16.) “If a deed purports to convey property that 15 is not owned by the grantor, it is ineffective to convey the property.” Miller & Star, 3 Cal. 16 Real Est. § 8:58 (4th ed.); see Bunch v. Indian Palms Vacation Club Owners Ass’n, Inc., 17 No. EDCV 11-01963-VAP, 2013 WL 2155383, at *5 (C.D. Cal. May 16, 2013) (“As 18 [Defendant] had no interest in the [real property] to convey, the . . . grant deed could not 19 convey anything at the time it was executed.”); Seeley v. Seymour, 237 Cal. Rptr. 282, 288 20 (Cal. Ct. App. 1987) (“An instrument void on its face casts no legal cloud on title and thus 21 presents no cause for a court of equity to interfere.”) (citing Marshall v. Desert Properties, 22 103 F.2d 551, 552 (9th Cir. 1939)). Plaintiff therefore fails to state a claim under Probate 23 Code § 859, and the Court grants the motions to dismiss this claim. 24 6. Leave to Amend Complaint 25 Generally, when a court dismisses a complaint, leave to amend is granted “even if 26 no request to amend the pleading was made, unless [the court] determines that the pleading 27 could not possibly be cured by the allegation of other facts.” Lopez v. Smith, 203 F.3d 28 1122, 1127 (9th Cir. 2000) (en banc) (internal citation omitted). 1 Here, the Court finds the deficiencies in Plaintiff’s claims for quiet title and violation 2 of Probate Code § 859 cannot be cured by the allegation of other facts and denies leave to 3 amend these claims. However, the Court will grant Plaintiff leave to amend his fraud claim. 4 B. Defendants’ Motion for Leave to File Counterclaim 5 Defendants have filed a Counterclaim alleging claims against Plaintiff for breach of 6 trust, breach of fiduciary duties, violation of California Probate Code §§ 850 and 859, and 7 abuse of process (the “Counterclaim”), as well as a motion for leave to file the 8 Counterclaim. (ECF Nos. 47, 48.) 9 Plaintiff first contends Defendants’ counterclaims are compulsory and therefore 10 barred because Defendants did not assert the claims in their answer to Plaintiff’s original 11 complaint. See Fed. R. Civ. P. 13(a)(1). However, Plaintiff’s reliance on Hydranautics v. 12 FilmTec Corp., 70 F.3d 533, 536 (9th Cir. 1995), is unavailing. As Defendants point out, 13 the rule in Hydranautics states: “If a party has a counterclaim which is compulsory and 14 fails to plead it, it is lost, and cannot be asserted in a second, separate action after 15 conclusion of the first.” Id. (emphasis added) The court did not hold that a counterclaim 16 is barred within an action where it is not asserted in response to an original complaint. The 17 Court declines to make such a finding here. 18 The question is thus whether Defendants were permitted to file their Counterclaim 19 as a matter of right, or whether they are required to seek leave to do so. Under Rule 13, a 20 court “may permit a party to file a supplemental pleading asserting a counterclaim that 21 matured or was acquired by the party after serving an earlier pleading.” Fed. R. Civ. P. 13. 22 Neither the Federal Rules of Civil Procedure nor the Ninth Circuit have squarely addressed 23 whether a defendant can assert new counterclaims in response to an amended complaint as 24 a matter of right, or whether leave of court is required. 25 Defendants explain they believe their counterclaims were properly filed as a matter 26 of right under the permissive approach, as applied in City of West Sacramento v. R & L 27 Business Management, No. 2:18-CV-900 WBS EFB, 2019 WL 2249630 (E.D. Cal. May 28 23, 2019), but they have filed the instant motion in case leave is required. Under this 1 approach, “a defendant served with an amended complaint may amend its answer as of 2 right without being limited by the scope of the changes made in the amended complaint.” 3 2019 WL 2249630 at *1 (citing Coppola v. Smith, No. 1:11-CV-1257 AWI BAM, 2015 4 WL 2127965, at *2 (E.D. Cal. May 6, 2015)). 5 However, “most district courts within the Ninth Circuit apply the moderate 6 approach,” under which “newly alleged counterclaims are allowed as of right only to the 7 extent they directly relate to changes in the amended complaint.” Id. (citations omitted); 8 see UDAP Indus., Inc. v. Bushwacker Backpack & Supply Co., No. CV 16-27-BU-JCL, 9 2017 WL 1653260, at *3 (D. Mont. May 2, 2017) (“District courts within the Ninth Circuit 10 continue to apply to [sic] the moderate approach because it is consistent with Rule 15 and 11 ‘is the most equitable and manageable’ of the three.”) The Court will therefore follow this 12 approach. 13 Under this approach, Defendants’ Counterclaim is not permitted as of right because 14 it does not directly relate to changes in the FAC. Although factual developments relevant 15 to this action—the cancellation of the Grant Deed and the sale of the Property—have 16 occurred between the filing of the complaint and the FAC, they are not directly alleged in 17 the FAC. Rather, Plaintiff’s FAC removed two causes of action and added Erika Parra in 18 her capacity as Executor of the Estate of Jose Miguel Parra. The Court thus turns to the 19 question of whether to grant Defendants leave to file the Counterclaim. 20 The standard for a motion for leave to file a counterclaim is the same as the standard 21 governing a motion for leave to amend a pleading under Federal Rule of Civil Procedure 22 15(a). A & M Petroleum, Inc. v. Markel Ins. Co., No. 13CV2903-GPC DHB, 2015 WL 23 3466014, at *1 (S.D. Cal. June 1, 2015) (citing Magnesystems, Inc. v. Nikken, Inc., 933 24 F.Supp. 944, 947 (C.D. Cal. 1996). Under Rule 15(a), “[t]he court should freely give leave 25 when justice so requires.” Fed. R. Civ. P. 15(a)(3). “This policy is to be applied with 26 extreme liberality.” Eminence Cap., LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 27 2003) (internal quotation marks and citation omitted). In determining whether to grant 28 leave, courts consider whether there is “undue delay, bad faith or dilatory motive on the 1 part of the movant, repeated failure to cure deficiencies by amendments previously 2 allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, 3 [and] futility of amendment.” Foman v. Davis, 371 U.S. 178, 182 (1962). 4 Plaintiff argues leave should be denied on the basis of undue delay, prejudice, and 5 judicial economy. Delay alone is an insufficient ground to deny a motion for leave, United 6 States v. Webb, 655 F.2d 977, 980 (9th Cir. 1981), and it is “the consideration of prejudice 7 to the opposing party that carries the greatest weight,” Eminence Cap., LLC, 316 F.3d at 8 1052. Plaintiff bears the burden of showing prejudice. See DCD Programs, Ltd. v. 9 Leighton, 833 F.2d 183, 187 (9th Cir. 1987). The Court finds Plaintiff has not met his 10 burden to show leave should be denied. 11 First, Plaintiff argues Defendants unduly delayed in filing their Counterclaim 12 because they had actual knowledge of their claims at the time they filed their answer to the 13 original complaint on July 6, 2020. However, Defendants’ Counterclaim is largely 14 premised on events which did not occur until later, including Plaintiff’s alleged failure to 15 distribute the proceeds from the sale of the Property, which sale did not occur until October 16 2020, and Plaintiff’s alleged abuse of process based on the filing of the FAC on February 17 16, 2021. Next, Plaintiff argues the Counterclaim will prejudice him because it will require 18 reopening of discovery as to Erika Parra, require Plaintiff to defend causes of action beyond 19 the scope of the FAC, and cause further costly litigation. The Court finds these 20 considerations are not so unduly prejudicial to Plaintiff as to warrant denial of leave to file 21 the Counterclaim. Moreover, the issues are sufficiently related such that judicial economy 22 is best served by trying the Counterclaim as part of the present suit, contrary to Plaintiff’s 23 contention that the Counterclaim should be the subject of a separate lawsuit. This action 24 has been pending in this Court for over a year and discovery is proceeding. Requiring 25 Defendants to file their Counterclaim separately would impose additional costs on the court 26 and on the parties. The Court accordingly grants Defendants leave to file their 27 Counterclaim. 28 / / / 1 IV. 2 CONCLUSION AND ORDER 3 For the reasons set out above, Defendants’ and Third-Party Defendants’ motions to 4 ||dismiss are granted, and Defendants’ motion to file counterclaim is granted. The Court 5 ||accepts Defendants’ counterclaims as filed. Plaintiff may file a Second Amended 6 ||Complaint within fourteen (14) days of this order. 7 IT IS SO ORDERED. 8 || Dated: May 20, 2021 em Dh 9 an Yn. 10 Hon. Dana M. Sabraw, Chief Judge United States District Court 1] 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28