1 2 3 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF NEVADA 6 * * *
7 UNITED STATES OF AMERICA, for the use Case No. 2:19-CV-1602 JCM (EJY) and benefit of SOURCE HELICOPTERS, 8 DIVISION OF ROGERS HELICOPTERS, ORDER INC., 9 Plaintiff(s), 10 v. 11 SAYERS CONSTRUCTION, LLC, et al., 12 Defendant(s). 13
14 Presently before the court is defendant Sayers Construction, LLC’s (“Sayers”) objection, 15 (ECF No. 44), to the magistrate judge’s order, (ECF No. 43), granting in part and denying in part 16 defendant’s motion for leave to file an amended counterclaim, (ECF No. 35). Plaintiff 17 responded, (ECF No. 45), and defendant filed no reply. 18 Also before this court is plaintiff’s motion to dismiss defendants’ counterclaims. (ECF 19 No. 30). Defendant responded, (ECF No. 36), and moved to amend its counterclaims, (ECF No. 20 35). 21 I. Background 22 On September 11, 2019, plaintiff filed its complaint alleging two causes of action against 23 defendants Sayers and Philadelphia Indemnity Insurance Company. (ECF No. 1). Sayers 24 answered, (ECF No. 16), and later, filed an amended answer, affirmative defenses, and original 25 counterclaims. (ECF No. 22). In it, Sayers asserted three causes of action: (1) common law 26 fraud/fraudulent inducement, (2) statutory fraud pursuant to Section 27.01 of the Texas Business 27 and Commerce Code, and (3) breach of contract. (Id.). 28 1 On December 23, 2019, plaintiff filed the instant motion to dismiss, (ECF No. 30), 2 arguing that Sayers’ fraud claims were insufficiently pleaded. (Id.). On January 21, 2020, 3 defendant moved to amend its counterclaims, (ECF No. 35), and responded that plaintiff’s 4 motion to dismiss was thus moot, (ECF No. 36). 5 The magistrate judge granted in part and denied in part defendant’s motion to amend. 6 (ECF No. 43). The magistrate judge found that defendant’s contract-related counterclaim and 7 and fraud-related counterclaims as they pertained to “plaintiff’s securing its own bond” could 8 proceed, but defendant’s fraud-related counterclaims as they pertained to “plaintiff’s start and 9 completion date representations” could not due to futility. (Id.). 10 Defendant filed its instant objection to the magistrate judge’s order. (ECF No. 44). 11 II. Legal Standard 12 Federal Rule of Civil Procedure 15(a) allows leave of court to amend a pleading when 13 justice so requires. However, courts may deny leave to amend based on the following factors: 14 bad faith, undue delay, prejudice to the opposing party, futility of amendment and whether the 15 party has previously amended its pleading. See Johnson v. Buckley, 356 F.3d 1067, 1077 (9th 16 Cir. 2004). 17 “A proposed amendment is futile only if no set of facts can be proved under the 18 amendment that would constitute a valid claim or defense.” Morris v. Cach, LLC, 2:13-cv- 19 00270-APG-GWF, 2013 WL 5738047, at *2 (D. Nev. Oct. 22, 2013) (citations omitted). Futility 20 may also be found where “proposed amendments are either duplicative of existing claims or 21 patently frivolous, or both.” Bonin v. Calderon, 59 F.3d 815, 846 (9th Cir. 1995). The test for 22 futility is akin to the “the test for a motion to dismiss under Federal Rule of Civil Procedure 23 12(b)(6).” Miller v. Rykoff-Sexton, Inc., 845 F.2d 209, 214 (9th Cir. 1988). “Futility alone can 24 justify the denial of a motion to amend.” Id. The party opposing amendment holds the burden to 25 demonstrate futility. DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 187 (9th Cir. 1987). 26 A magistrate judge’s jurisdiction to enter an order, rather than to issue recommendations 27 to the district court, is dependent on whether the matter before that magistrate judge is 28 1 characterized as dispositive or non-dispositive of a claim or defense of a party. See 28 U.S.C. § 2 636(b)(1); see also Fed. R. Civ. P. 72. 3 Generally, a motion for leave to amend the pleadings is considered non-dispositive. See 4 U.S. Dominator, Inc. v. Factory Ship Robert E. Resoff, 768 F.2d 1099, 1102 n. 1 (9th Cir. 1985), 5 superseded by statute on other grounds as recognized in Simpson v. Lear Astronics Corp., 77 6 F.3d 1170 (9th Cir. 1996) (noting that the plaintiff’s motion for leave to amend its Complaint 7 was properly treated as a non-dispositive motion when the magistrate judge granted the 8 plaintiff’s motion). However, sometimes a motion for leave to amend the pleadings is 9 dispositive, especially when denied; courts are split on the matter. See JJCO, Inc. v. Isuzu Motors 10 America, Inc., 2009 WL 3818247 (D. Hawaii 2009) (magistrate judge’s order denying leave to 11 amend complaint was non-dispositive); Gossett v. Stewart, 2009 WL 3379018 (D. Ariz. 2009) 12 (denial of motion for leave to amend was treated as dispositive because the denial would 13 effectively dismiss four of plaintiff’s proposed causes of action). As a guiding principle, the 14 court must look to the “effect of the motion” to determine whether it is dispositive or non- 15 dispositive of a claim or defense of a party. United States v. Rivera–Guerrero, 377 F.3d 1064, 16 1068 (9th Cir. 2004) (internal citations omitted). 17 A magistrate judge’s decision on a non-dispositive motion may be reversed only if it is 18 clearly erroneous or contrary to law. Grand Canyon Skywalk Dev., LLC v. Cieslak, No. 2:13- 19 CV-596-JAD-GWF, 2015 WL 1805055, at *2 (D. Nev. Apr. 20, 2015). But where a magistrate 20 judge’s decision is dispositive, the district judge reviews de novo. Grand Canyon, 2015 WL 21 1805055, at *2. 22 III. Discussion 23 A. Standard of Review 24 This court reviews the magistrate judge’s order de novo. Although there is a split in 25 authority on the matter, this court finds that a denial of a motion to amend premised on futility is 26 dispositive. Indeed, futility requires a finding “beyond doubt that the plaintiff can prove no set 27 of facts in support of his claims which would entitle him to relief.” Cach, 2013 WL 5738047, at 28 *2 (citations omitted). Our circuit has recognized this test as akin to the “the test for a motion to 1 dismiss under Federal Rule of Civil Procedure 12(b)(6).” Miller v. Rykoff-Sexton, Inc., 845 F.2d 2 209, 214 (9th Cir. 1988). Upon examining defendants’ proposed amendment, the court weighed 3 in on the pleadings and barred defendants from bringing their proposed claims as to a set of facts. 4 In doing so, this court disposed of those claims; the effect of that action is dispositive. 5 B. Denial of Motion for Leave to Amend 6 Having reviewed the matter de novo, this court affirms the magistrate judge’s conclusion 7 in full. 8 For its fraud-related counterclaims, the defendant plainly alleges two distinct instances of 9 fraud: one involving plaintiff’s representation that it would obtain a bond, and the other 10 involving plaintiff’s representations regarding the start and completion dates of the contracted 11 project. (ECF No.
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1 2 3 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF NEVADA 6 * * *
7 UNITED STATES OF AMERICA, for the use Case No. 2:19-CV-1602 JCM (EJY) and benefit of SOURCE HELICOPTERS, 8 DIVISION OF ROGERS HELICOPTERS, ORDER INC., 9 Plaintiff(s), 10 v. 11 SAYERS CONSTRUCTION, LLC, et al., 12 Defendant(s). 13
14 Presently before the court is defendant Sayers Construction, LLC’s (“Sayers”) objection, 15 (ECF No. 44), to the magistrate judge’s order, (ECF No. 43), granting in part and denying in part 16 defendant’s motion for leave to file an amended counterclaim, (ECF No. 35). Plaintiff 17 responded, (ECF No. 45), and defendant filed no reply. 18 Also before this court is plaintiff’s motion to dismiss defendants’ counterclaims. (ECF 19 No. 30). Defendant responded, (ECF No. 36), and moved to amend its counterclaims, (ECF No. 20 35). 21 I. Background 22 On September 11, 2019, plaintiff filed its complaint alleging two causes of action against 23 defendants Sayers and Philadelphia Indemnity Insurance Company. (ECF No. 1). Sayers 24 answered, (ECF No. 16), and later, filed an amended answer, affirmative defenses, and original 25 counterclaims. (ECF No. 22). In it, Sayers asserted three causes of action: (1) common law 26 fraud/fraudulent inducement, (2) statutory fraud pursuant to Section 27.01 of the Texas Business 27 and Commerce Code, and (3) breach of contract. (Id.). 28 1 On December 23, 2019, plaintiff filed the instant motion to dismiss, (ECF No. 30), 2 arguing that Sayers’ fraud claims were insufficiently pleaded. (Id.). On January 21, 2020, 3 defendant moved to amend its counterclaims, (ECF No. 35), and responded that plaintiff’s 4 motion to dismiss was thus moot, (ECF No. 36). 5 The magistrate judge granted in part and denied in part defendant’s motion to amend. 6 (ECF No. 43). The magistrate judge found that defendant’s contract-related counterclaim and 7 and fraud-related counterclaims as they pertained to “plaintiff’s securing its own bond” could 8 proceed, but defendant’s fraud-related counterclaims as they pertained to “plaintiff’s start and 9 completion date representations” could not due to futility. (Id.). 10 Defendant filed its instant objection to the magistrate judge’s order. (ECF No. 44). 11 II. Legal Standard 12 Federal Rule of Civil Procedure 15(a) allows leave of court to amend a pleading when 13 justice so requires. However, courts may deny leave to amend based on the following factors: 14 bad faith, undue delay, prejudice to the opposing party, futility of amendment and whether the 15 party has previously amended its pleading. See Johnson v. Buckley, 356 F.3d 1067, 1077 (9th 16 Cir. 2004). 17 “A proposed amendment is futile only if no set of facts can be proved under the 18 amendment that would constitute a valid claim or defense.” Morris v. Cach, LLC, 2:13-cv- 19 00270-APG-GWF, 2013 WL 5738047, at *2 (D. Nev. Oct. 22, 2013) (citations omitted). Futility 20 may also be found where “proposed amendments are either duplicative of existing claims or 21 patently frivolous, or both.” Bonin v. Calderon, 59 F.3d 815, 846 (9th Cir. 1995). The test for 22 futility is akin to the “the test for a motion to dismiss under Federal Rule of Civil Procedure 23 12(b)(6).” Miller v. Rykoff-Sexton, Inc., 845 F.2d 209, 214 (9th Cir. 1988). “Futility alone can 24 justify the denial of a motion to amend.” Id. The party opposing amendment holds the burden to 25 demonstrate futility. DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 187 (9th Cir. 1987). 26 A magistrate judge’s jurisdiction to enter an order, rather than to issue recommendations 27 to the district court, is dependent on whether the matter before that magistrate judge is 28 1 characterized as dispositive or non-dispositive of a claim or defense of a party. See 28 U.S.C. § 2 636(b)(1); see also Fed. R. Civ. P. 72. 3 Generally, a motion for leave to amend the pleadings is considered non-dispositive. See 4 U.S. Dominator, Inc. v. Factory Ship Robert E. Resoff, 768 F.2d 1099, 1102 n. 1 (9th Cir. 1985), 5 superseded by statute on other grounds as recognized in Simpson v. Lear Astronics Corp., 77 6 F.3d 1170 (9th Cir. 1996) (noting that the plaintiff’s motion for leave to amend its Complaint 7 was properly treated as a non-dispositive motion when the magistrate judge granted the 8 plaintiff’s motion). However, sometimes a motion for leave to amend the pleadings is 9 dispositive, especially when denied; courts are split on the matter. See JJCO, Inc. v. Isuzu Motors 10 America, Inc., 2009 WL 3818247 (D. Hawaii 2009) (magistrate judge’s order denying leave to 11 amend complaint was non-dispositive); Gossett v. Stewart, 2009 WL 3379018 (D. Ariz. 2009) 12 (denial of motion for leave to amend was treated as dispositive because the denial would 13 effectively dismiss four of plaintiff’s proposed causes of action). As a guiding principle, the 14 court must look to the “effect of the motion” to determine whether it is dispositive or non- 15 dispositive of a claim or defense of a party. United States v. Rivera–Guerrero, 377 F.3d 1064, 16 1068 (9th Cir. 2004) (internal citations omitted). 17 A magistrate judge’s decision on a non-dispositive motion may be reversed only if it is 18 clearly erroneous or contrary to law. Grand Canyon Skywalk Dev., LLC v. Cieslak, No. 2:13- 19 CV-596-JAD-GWF, 2015 WL 1805055, at *2 (D. Nev. Apr. 20, 2015). But where a magistrate 20 judge’s decision is dispositive, the district judge reviews de novo. Grand Canyon, 2015 WL 21 1805055, at *2. 22 III. Discussion 23 A. Standard of Review 24 This court reviews the magistrate judge’s order de novo. Although there is a split in 25 authority on the matter, this court finds that a denial of a motion to amend premised on futility is 26 dispositive. Indeed, futility requires a finding “beyond doubt that the plaintiff can prove no set 27 of facts in support of his claims which would entitle him to relief.” Cach, 2013 WL 5738047, at 28 *2 (citations omitted). Our circuit has recognized this test as akin to the “the test for a motion to 1 dismiss under Federal Rule of Civil Procedure 12(b)(6).” Miller v. Rykoff-Sexton, Inc., 845 F.2d 2 209, 214 (9th Cir. 1988). Upon examining defendants’ proposed amendment, the court weighed 3 in on the pleadings and barred defendants from bringing their proposed claims as to a set of facts. 4 In doing so, this court disposed of those claims; the effect of that action is dispositive. 5 B. Denial of Motion for Leave to Amend 6 Having reviewed the matter de novo, this court affirms the magistrate judge’s conclusion 7 in full. 8 For its fraud-related counterclaims, the defendant plainly alleges two distinct instances of 9 fraud: one involving plaintiff’s representation that it would obtain a bond, and the other 10 involving plaintiff’s representations regarding the start and completion dates of the contracted 11 project. (ECF No. 35-1). 12 Under Federal Rule of Civil Procedure 9(b), claims for common law fraud require a party 13 to plead with particularity “the circumstances constituting fraud” as well as “[m]alice, intent, 14 knowledge, and other conditions of a person’s mind.” The Fifth Circuit, like the Ninth Circuit, 15 interprets 9(b)’s particularity requirement as mandating that the pleading party “specify the 16 statements contended to be fraudulent, identify the speaker, state when and where the statements 17 were made, and explain why the statements were fraudulent.” Herrmann Holdings Ltd. v. Lucent 18 Tech. Inc., 302 F.3d 552, 564–65 (5th Cir. 2002); Vess v. Ciba-Geigy Corp., USA, 317 F.3d 19 1097, 1103 (9th Cir. 2003). In other words, the pleading must include the who, what, when, 20 where, and how of the alleged fraud. Ebeid ex rel. U.S. v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 21 2010) (citing Vess, 317 F.3d at 1106); U.S. ex rel. Thompson v. Columbia/HCA Healthcare 22 Corp., 125 F. 3d, 899, 903 (5th Cir. 1997) (citation omitted). 23 The proposed amended complaint alleges the following facts as to the start and 24 completion dates: 25 • Specific email exchanges demonstrate plaintiff’s representation that it would start the 26 project no later than December, (ECF No. 35-1); 27 • In late October 2017, plaintiff sought agreement to a “worse [sic] case” start date of 28 January 8, 2018, which Sayers rejected, (id.); 1 • Plaintiff’s failure to start the project in December 2017 allegedly supports the conclusion 2 that “[p]laintiff never had any intention of doing so,” which is further supported by 3 plaintiff’s proposed worst case scenario start date of January 8, 2018, (id.); 4 • Plaintiff’s representations to Sayers were made to “induce Sayers into entering [into] the 5 [a]greement with” plaintiff, (id.); 6 • There were specific email exchanges about plaintiff completing the project by May 31, 7 2018, (id.); 8 • Plaintiff’s representations regarding the completion date was material to Sayers when 9 deciding to enter into the agreement, (id.); 10 • The agreement says plaintiff will complete its work no later than July 20, 2018, (id.); 11 • “[C]ontrary to its representations to Sayers during the bidding process, . . . [plaintiff] 12 failed to mobilize on the Project in December 2017, and failed to complete its work on 13 the Project by the end of April or May 2018. And contrary to its obligations in the 14 Agreement’s Project Schedule, [plaintiff] failed to mobilize on the Project by December 15 4, 2017, and failed to complete its work on the Project by July 20, 2018.” (Id.). 16 Defendant’s proposed pleadings fail “to explain why the statements” alleged to be 17 fraudulent were, in fact, fraudulent. Williams v. WMX Technologies, Inc., 112 F.3d 175, 177 (5th 18 Cir. 1997). The proposed amended pleadings state only the element of plaintiff’s intent in a 19 conclusory manner. (ECF No. 35). The plaintiff’s actions and failures to act, alleged above, 20 simply do not allow a reasonable inference regarding intent behind plaintiff’s representations. 21 The proposed amended complaint’s claims of fraud regarding start and completion date are 22 futile. 23 In light of the impending amendments to defendants’ counterclaims, this court also 24 denies plaintiff’ motion to dismiss as moot. 25 Conclusion 26 Accordingly, 27 IT IS HEREBY ORDERED ADJUDGED DECREED that defendant’s objection/appeal 28 to the district court from the magistrate judge’s order granting in part and denying in part 1 | defendant’s motion for leave to file an amended counterclaim (ECF No. 44) be, and the same 2| hereby is, DENIED. 3 IT IS FURTHER ORDERED that plaintiff's motion to dismiss defendants’ counterclaims 4| (ECF No. 30) be, and the same hereby is, DENIED as moot. 5 DATED July 6, 2020. 6 J Bettis © Ata llars 4 UINITED, STATES DISTRICT JUDGE 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
es C. Mahan District Judge -6-