1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 Wells Fargo Bank NA, No. CV-24-02337-PHX-DJH
10 Plaintiff, ORDER
11 v.
12 Prime1 Construction LLC, et al.,
13 Defendants. 14 15 Plaintiff Wells Fargo Bank, N.A. (“Wells Fargo”) filed a Complaint against Prime1 16 Construction, LLC (“Prime1”); Phillip Aguilar; and Ankur R. Shah and Ruchi A. Jain 17 (collectively, “The Shahs”), solely in their capacity as trustees of The Ankur & Ruchi Shah 18 Family Trust (“The Trust”) (Doc. 1). Along with the Second Amended Answer, the Shahs, 19 individually and in their capacity as trustees of the Trust, filed a Third-Party Complaint 20 against Masizo Development, LLC (“Masizo”) (Doc. 46). Masizo has filed a Motion to 21 Dismiss for Lack of Subject Matter Jurisdiction and for Failure to State a Claim under 22 Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6).1 (Doc. 55). The Court will 23 partially grant Masizo’s Motion. 24 I. Background 25 A. Wells Fargo’s Complaint 26 Wells Fargo is a citizen of South Dakota. (Doc. 1 at ¶ 1). Prime1, Aguilar, the 27 Shahs, and the Trust are citizens of Arizona. (Doc. 1 at ¶ 2–8). The Shahs allege that
28 1 Any references to “rules” herein are in reference to the Federal Rules of Civil Procedure, unless stated otherwise. 1 Masizo is a citizen of Arizona. (Doc. 46 at ¶5). 2 In the Complaint, Wells Fargo alleges that the Trust has an account with them, and 3 that the Trust fraudulently made a fraud claim to have Wells Fargo reverse a charge. 4 (Doc. 1). Specifically, Wells Fargo alleges that the Shahs filed a fraud claim alleging that 5 the date on a check payable from the Trust account to Prime1 had been altered. 6 (Id. at ¶¶ 27–30). However, they claim that the Shahs had in fact ratified the change of 7 date in a text exchange with Aguilar, the owner of Prime1. (Id. at ¶ 28). They therefore 8 allege that they lost the $125,000 that was returned to the Trust account because of the 9 fraud claim. (Id. at ¶ 33). Due to these allegations, Wells Fargo brought three counts 10 against the Trust and Prime1: (1) breach of contract against the Trust; (2) breach of the 11 implied covenant of good faith and fair dealing against the Trust; (3) fraud against the 12 Trust; (4) breach of contract against Prime1; (5) breach of the implied covenant of good 13 faith and fair dealing against Prime1; and (6) fraud against Prime1. (Id. at ¶¶ 47–95). 14 B. The Shahs’ Cross-Claims and Third-Party Complaint 15 The Shahs then filed Cross-Claims against Prime1 and Aguilar, and a Third-Party 16 Complaint (“TPC”) against Masizo. (Doc. 46). There, they allege that they had been 17 searching for a contractor for a home remodeling project. (Id. at ¶ 9). They found a 18 designer who referred them to a contractor known as Jordan Rodriguez, allegedly a fake 19 name used by Aguilar. (Id. at ¶ 11–14). The Shahs allege that Aguilar “deliberately 20 induced” them to sign a fraudulent contract (the “Contract”), knowing that his company 21 Prime1 was unlicensed. (Id. at ¶ 21). The check at issue in the Complaint was a down 22 payment for the Contract. (Id. at ¶ 17). 23 The Contract was in the name of Prime1, but listed Masizo’s Registrar of 24 Contractors number. (Doc. 46-1 at 1). It also references Masizo’s name multiple times as 25 Prime1’s partner. (Id. at 4–5). For example, it states: “This Contract Agreement (this 26 “Agreement”) between Homeowner (Home Owner”) [sic] and, Masizo & partner Prime1 27 Construction, LLC.” (Id. at 4). It frequently refers to Prime1 and Masizo collectively, 28 such as by saying “Prime1 Construction, LLC/Masizo shall provide all labor and materials 1 and perform all work necessary” according to “specifications signed by both Owner and 2 Masizo/Prime1 Construction, LLC.” (Id.) 3 However, the Contract seems to indicate that Prime1 is unlicensed. (Id. (noting that 4 “Prime1 Construction, LLC are not acting or offer in capacity of a license contractor [sic]” 5 and “Prime1 Construction, LLC - non-license Project Management Company: shall 6 company maintain general liability, workers compensation and builder’s risk insurance 7 [sic].”). It also states that Prime1 and Masizo are not responsible for any work performed. 8 (Id. at 4–5) 9 The Shahs further allege that they “uncovered significant red flags indicative of 10 deliberate fraud” on the part of Aguilar and Prime1. (Doc. 46 at ¶ 18). Noting the 11 references to Masizo in the Contract, the Shahs allege that they contacted Masizo, and that 12 an owner of Masizo told them that he knew Aguilar but was unaware of the Contract. (Id. 13 at ¶¶ 30-31). Later that day, however, when Aguilar called him in front of the Shahs, the 14 owner told them that he would be a consultant to Aguilar for the project. (Id.) 15 The Shahs then allege that Wells Fargo contacted them about the check, and they 16 directed Wells Fargo to dishonor it. (Id. at ¶¶ 23–24). According to the Shahs, Wells Fargo 17 initially dishonored the check, but later reversed it and credited Prime1’s account, 18 whereupon Aguilar withdrew the funds and “absconded” with them. (Id. at ¶¶ 27–29). 19 Additionally, the Shahs claim that after the parties had agreed to terminate the Contract, 20 Shah and Jain agreed to pay another $3,000 to remove a dumpster that Prime1 had delivered 21 to their house. (Id. at ¶ 32). They claim that they were not legally obligated to pay that 22 sum, but Aguilar had made a “contrary representation” to them. (Id. at ¶ 33). 23 The Shahs assert that if the Trust is found liable to Wells Fargo, then Prime1, 24 Aguilar, and Masizo must be found liable to the Shahs. (Id. at ¶ 37). They claim that 25 Prime1, Aguilar, and Masizo acted in a coordinated conspiracy to defraud them, using 26 Masizo’s license to present a veneer of legitimacy. (Id. at ¶ 38). The Shahs bring three 27 Counts against Masizo: (1) breach of contract, (2) unjust enrichment, and (3) fraud. (Id.). 28 Masizo seeks to dismiss the Third-Party Complaint for lack of subject matter jurisdiction 1 and for failure to state a claim. (Doc. 55). 2 II. Legal Standard 3 A motion to dismiss under Rule 12(b)(1) tests the subject matter jurisdiction of the 4 court. See Savage v. Glendale Union High Sch., 343 F.3d 1036, 1039–40 (9th Cir. 2003). 5 The party asserting jurisdiction bears the burden of rebutting the presumption against 6 subject matter jurisdiction. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 7 (1994). A court must dismiss a plaintiff’s complaint if it fails to establish subject matter 8 jurisdiction. Savage, 343 F.3d at 1039 n.2. 9 Jurisdictional challenges can be either facial or factual. See Safe Air for Everyone 10 v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). A facial attack exists when a defendant 11 asserts the complaint’s jurisdictional allegations are insufficient on their face to 12 demonstrate jurisdiction. See Menza v. United States Dep’t of the Treasury, 1999 WL 13 550243, *1 (D. Or. 1999), aff’d 2000 WL 1029069 (9th Cir. 2000). Where the attack is 14 factual, “the court need not presume the truthfulness of the plaintiff’s allegations.” Safe 15 Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). 16 Under Rule 12(b)(6), a court must dismiss a complaint if it fails to state a claim 17 upon which relief can be granted. The complaint requires a “short and plain statement of 18 the claim showing that the pleader is entitled to relief” to ensure that the defendant has “fair 19 notice of what the . . . claim is and the grounds upon which it rests.” Bell Atl. Corp. v. 20 Twombly, 550 U.S. 544, 555 (2007). The complaint must contain sufficient factual content 21 to state a claim for relief that is “plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 22 678 (2009). A claim is plausible on its face when the factual allegations are sufficient for 23 the court “to draw the reasonable inference that the defendant is liable.” Id. When 24 evaluating a Rule 12(b)(6) motion, the court must accept the plaintiff’s allegations as true 25 and construe them in the light most favorable to the plaintiff. Zucco Partners, LLC v. 26 Digimarc Corp., 552 F.3d 981, 989 (9th Cir. 2009). That rule does not apply, however, to 27 legal conclusions. Iqbal, 556 U.S. at 678. If the court dismisses a complaint for failure to 28 state a claim, it must then determine whether to grant leave to amend. See Telesaurus VPC, 1 LLC v. Power, 623 F.3d 998, 1003 (9th Cir. 2010). 2 III. Discussion 3 Masizo argues that the TPC should be dismissed because (1) the Court lacks 4 diversity jurisdiction; (2) it should not exercise supplemental jurisdiction; (3) the TPC does 5 not involve the same case or controversy; (4) the Trust did not enter the Contract; (5) the 6 TPC fails to allege unjust enrichment; and (6) the Trust is not a party to the Contract which 7 is required to maintain a breach of fraud claim. (Doc. 55 at 7–14). The Court will address 8 each argument in turn. 9 A. The Rule 12(b)(1) Motion 10 1. Wells Fargo did not Join the Shahs in their Individual Capacity 11 Masizo contends that Wells Fargo did not join the Shahs as a party in their 12 individual capacity, so the TPC cannot be maintained. (Doc. 55 at 7–8). 13 Arizona law governs the capacity of parties to sue or be sued. Fed. R. Civ. P. 17(b). 14 Generally, trusts lack the capacity to sue or be sued under Arizona law.2 Paul Johnson 15 Drywall Inc. v. Sterling Grp. LP, 2021 WL 3709851, at *2 (D. Ariz. Aug. 20, 2021); see 16 also Matter of Book, 2019 WL 2394259, at *2 (Ariz. Ct. App. June 6, 2019), (unpublished) 17 (“Generally, a common-law trust is not considered a legal entity capable of suing or being 18 sued; therefore, any suit involving the trust must be brought by or against its trustee.” 19 (citations omitted)). As such, the trustees, rather than the trust, are the real party in interest 20 in litigation involving the trust. Irwin Union Collateral Inc. v. Peters & Burris, LLC, 2009 21 WL 5184902, at *4 (D. Ariz. Dec. 22, 2009). There is a distinction between naming a party 22 as an individual or as a trustee. Mut. of Omaha Loanpro LLC v. Alta Mesa II, LLC, 2011 23 WL 13122482, at *2 (D. Ariz. Feb. 28, 2011); see also Matter of Book, 2019 WL 2394259, 24 at *2 (“[A] trustee may be sued in a representative capacity, as an individual, or both.”). 25 Masizo relies on Mut. of Omaha Loanpro LLC, where the district court dismissed 26 claims brought against defendant trusts. There, the court found it insufficient that
27 2 Common-law trusts cannot sue or be sued, but business trusts created under A.R.S. § 10- 1871 may sue in their own name. McLeod v. Deutsche Bank Nat’l Tr. Co., 2017 WL 28 2189498, *3 (Ariz. Ct. App. May 18, 2017) (unpublished). Both parties seem to accept that the Trust is a common-law trust. 1 individuals who “happen[ed] to be trustees” were also named as defendants, because they 2 had not been named as trustees. Mut. of Omaha Loanpro LLC, 2011 WL 13122482, at *2 3 (“Plaintiff has sued the Trusts; it has not sued the trustees. It is not sufficient that plaintiff 4 sued individuals who also happen to be trustees of the defendant trusts.”). Therefore, 5 naming a party in an individual capacity is not the equivalent of naming the party in its 6 capacity as a trustee. Id. Since that is the case, it must also be true that naming a party in 7 its capacity as a trustee does not also name the party as an individual. See Mut. of Omaha 8 Loanpro LLC, 2011 WL 13122482, at *2; Matter of Book, 2019 WL 2394259, at *2. 9 Wells Fargo’s Complaint names the Shahs “solely in their capacity as trustees” 10 (Doc. 1), but the TPC lists the Shahs “individually and in their capacity as trustees” as 11 Third-Party Plaintiffs (Doc. 46) (emphasis added). Masizo is correct. The Shahs in their 12 individual capacities are not original defendants and they therefore cannot be Third-Party 13 Plaintiffs. See Fed. R. Civ. P. 14(a) (detailing “When a Defending Party May Bring in a 14 Third Party.”). 15 The Shahs urge that, “[a]s a practical matter,” they acted in their individual 16 capacities, their capacities as trustees, or both throughout the facts of this case, and their 17 interests always aligned with the Trust’s. (Doc. 60 at 7). That may be so, but having the 18 proper parties is not merely an issue of formality. The Shahs can only bring third-party 19 claims as individuals if they are named as defendants in their individual capacities. Fed. 20 R. Civ. P. 14(a). They are not. So, the claims of the Shahs as individuals must be 21 dismissed. Mut. of Omaha Loanpro LLC, 2011 WL 13122482, at *2. 22 2. The Assignment is Improper and does not Establish Subject Matter Jurisdiction for the Shahs as Individuals 23 24 Next, the Shahs present an “Assignment Agreement,” in which they purport to 25 assign the Claims as individuals against Prime1, Aguilar, and Masizo to the Trust. 26 (Doc. 60-1). Therein, the Shahs claim to convey “any and all of the Claims, without 27 warranty” to the Trust for unspecified “good and valuable consideration.” (Id.) The 28 agreement is dated March 26, 2025, which is after Masizo’s Motion was filed on February 1 25. (Id.) 2 Although the assignment involves assignment of claims of nonparties in a third- 3 party action, the facts in this case are similar to those involving assignments to establish 4 diversity jurisdiction. A party cannot create diversity jurisdiction through improper or 5 collusive assignment. 28 U.S.C.A. § 1359. “Improper or collusive assignment” means an 6 attempt to create jurisdiction by colorable assignment without substance. Caribbean Mills, 7 Inc. v. Kramer, 392 F.2d 387, 393 (5th Cir. 1968), aff’d Kramer v. Caribbean Mills, Inc., 8 394 U.S. 823 (1969). 9 This case is analogous to Syms v. Castleton Indus., Inc., 470 F.2d 1078 (5th Cir. 10 1972), another case involving assignment in a family trust. In Syms, a family trust with a 11 mother and son as trustees invested money with the defendants. Syms, 470 F.2d at 1080. 12 The defendants failed to pay federal income tax on profits for the investment. Id. The 13 mother and all the trust members assigned their interest to the son, believing that doing so 14 would create diversity jurisdiction. Id. at 1083. The court relied on the lack of 15 consideration and the fact that the assignors retained an interest in the proceeds to find the 16 assignment collusive and dismissed the case. Id. 17 Here, the assignment agreement provides that there was “good and valuable 18 consideration” but does not specify what it was. (Doc. 60-1 at 1). As in Syms, the Shahs 19 as individuals effectively retain an interest in the proceeds because they are also the 20 trustees. And it is notable that the agreement was made after the Motion to Dismiss was 21 filed. Viewed in the aggregate, these factors suggest that the Shahs chose to make the 22 assignment to allow the Trust to bring in the impermissible Claims. See Syms, 470 F.2d at 23 1083. 24 In sum, the Court finds that the assignment of the Claims is improper and collusive 25 and the Claims of the Shahs as individuals are dismissed. The only remaining Claims, 26 then, are those of the Shahs as trustees. 27 / / / 28 / / / 1 3. 28 U.S.C. § 1367 does not Require Complete Diversity Between Third Party Plaintiffs and Third-Party Defendants 2 3 Plaintiff Wells Fargo filed suit in this Court based on diversity jurisdiction under 28 4 U.S.C. § 1332. (Doc. 1 at ¶ 9). The Shahs filed the Third-Party Claim based on 5 supplemental jurisdiction under 28 U.S.C. § 1367(a). (Doc. 46 at ¶ 6). Masizo contends 6 that the TPC must be dismissed for lack of subject matter jurisdiction because the Shahs 7 and Masizo lack complete diversity. (Doc. 55 at 8). The Court disagrees. 8 Section 1367(a) grants courts broad supplemental jurisdiction over other claims 9 within the same case or controversy if they have original jurisdiction over the action. Exxon 10 Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 558 (2005). The Court has original 11 jurisdiction under 28 U.S.C. § 1332 because (1) Wells Fargo is diverse from Prime1, 12 Aguilar, the Shahs, and the Trust; and (2) the amount in controversy exceeds $75,000. 13 Masizo argues that Section 1367(b) prohibits a third-party claim against a new 14 nondiverse party because it bars supplemental jurisdiction over claims by persons seeking 15 to intervene as plaintiffs. (Doc. 55 at 7–9). However, Congress intended Section 1367(b) 16 to “prevent original plaintiffs . . . from circumventing the requirements of diversity.” 17 Aurora Loan Services, Inc. v. Craddieth, 442 F.3d 1018, 1025 (7th Cir. 2006) (citations 18 omitted) (emphasis in original). In other words, Section 1367(b) stops a nondiverse party 19 from waiting to sue until a diverse party sues the defendant, and thereby evading the 20 complete diversity requirement of Section 1332. 21 This provision does not apply to this case because the original plaintiff, Wells Fargo, 22 does not assert any claim against Masizo. (See Doc. 1). Here, Section 1367(b) would 23 prevent Wells Fargo (or another party joining or intervening as plaintiff) from 24 circumventing the requirement of diversity and bringing a claim against a nondiverse third- 25 party defendant. That is not the situation here. The Shahs are not the original plaintiffs. 26 Thus, there is no requirement that they be diverse from Masizo. 28 U.S.C. § 1367. 27 / / / 28 / / / 1 4. The Third-Party Complaint Forms Part of the Same Claim or Controversy and does not Predominate Over the Original Claim 2 3 Masizo also claims that the Third-Party Complaint does not meet the requirements 4 of 28 U.S.C. § 1367(a) because the allegations in the Third-Party Complaint do not “form 5 part of the same case or controversy” as the original Complaint. (Doc. 55 at 10–12). If 6 they do, Masizo further asserts that the Court should decline supplemental jurisdiction 7 because of Section 1367(c)(2), which states that courts may decline supplemental 8 jurisdiction if the claim “substantially predominates” over the original claim. 28 U.S.C. § 9 1367(c)(2). 10 A claim forms part of the same case or controversy when it shares a “common 11 nucleus of operative fact” with the claim over which the court has original jurisdiction, and 12 the claims would normally be tried together. Bahrampour v. Lampert, 356 F.3d 969, 978 13 (9th Cir. 2004). Similarly, one indication that a claim does not substantially predominate 14 over the original claim is if it shares a common nucleus of operative fact. Mincy v. Staff 15 Leasing, L.P., 100 F.Supp.2d 1050, 1053 (D. Ariz. 2000). When deciding whether to 16 exercise supplemental jurisdiction, courts are guided by the values of “economy, 17 convenience, fairness and comity.” Bahrampour, 356 F.3d at 978 (citing Executive 18 Software N. Am., Inc. v. United States Dist. Court, 24 F.3d 1545, 1557–58 (9th Cir. 1994)). 19 a. Common Nucleus of Operative Fact 20 Here, Masizo argues that, while the two matters are close in time, they are distinct 21 and unrelated. (Doc. 55 at 10–12). It describes the Complaint as only about an alleged lie 22 by the Shahs to Wells Fargo. (Doc. 64 at 5). It points out that any alleged fraud by Masizo 23 against Shah and Jain could not have directly precipitated the Shah’s alleged false fraud 24 claim to Wells Fargo. (Doc. 55 at 11). It asserts that no alleged action of Masizo forced 25 the Shahs into lying to Wells Fargo. (Id.) 26 Yet, the Complaint includes more than merely alleged fraud by the Shahs. Prime1 27 and Aguilar are also named as defendants. (Doc. 1). Wells Fargo has brought three Counts 28 against Prime1 and Aguilar, and there are numerous factual allegations about their conduct 1 in the Complaint. (See id.). At its core, the Complaint is about funds in a check related to 2 a contract between the Shahs and Prime1. (See id.). This same Contract describes Masizo 3 as Prime1’s partner and lists its Registrar of Contractors number. (Doc. 46-1). The Shahs 4 also allege that an agent of Masizo admitted to them that it knowingly allowed Aguilar and 5 Prime1 to operate under its license. (Doc. 46 at ¶ 22). 6 Accepting the allegations in the Third-Party Complaint as true, as the Court must, 7 it finds that the claims do arise from a common nucleus of operative fact for supplemental 8 jurisdiction purposes. They thus form part of the same case and controversy. Bahrampour, 9 356 F.3d at 978. 10 b. Economy, Convenience, and Fairness 11 Furthermore, the values of economy, convenience, and fairness support the Court’s 12 exercise of supplemental jurisdiction for two reasons. First, the claims arise from a 13 common nucleus of operative fact, so the Third-Party Claims are unlikely to substantially 14 predominate over the original claims. Second, the Claims in the TPC are derivative of and 15 dependent on the outcome of the main claim. (See Doc. 60 at 11). That is, unless the Shahs 16 are liable to Wells Fargo, they have no damages claim against Masizo. Economy and 17 convenience weigh in favor of the Court exercising supplemental jurisdiction here. 18 Bahrampour, 356 F.3d at 978. 19 c. Masizo’s Liability to Wells Fargo 20 Masizo makes an additional argument that the Claims will predominate because 21 Masizo “did nothing to make the Trust liable to [Wells Fargo].” (Doc. 64 at 5). Therefore, 22 it claims, the Third Party Claims will confuse the issues and create a “side show” about the 23 Contract that will distract from the claims in the Complaint. (Id. at 6). 24 It is true that the Shahs have not alleged that Masizo’s conduct could have caused 25 them to be liable to Wells Fargo. However, Rule 14 “does not require that the third-party 26 defendant be liable to the original plaintiff” for a third-party claim to proceed. Huggins v. 27 Graves, 337 F.2d 486, 489 (6th Cir. 1964); see also Irwin v. Mascott, 94 F.Supp.2d 1052, 28 1056 (N.D. Cal. 2000) (holding that Rule 14 “does not mean that the third-party defendant 1 must be liable to the original plaintiff.”). Rather, the claim must be derivative of the main 2 claim and dependent on its outcome. Stewart v. Am. Int’l Oil & Gas Co., 845 F.2d 196, 3 199 (9th Cir. 1988). Here, the Third-Party Claims are dependent on the outcome of the 4 main claim. So, it is appropriate for the Court to exercise supplemental jurisdiction here. 5 Id. 6 B. The Rule 12(b)(6) Motion 7 1. Breach of Contract against Masizo 8 To state a claim for breach of contract under Arizona law, the Third-Party Plaintiffs 9 must allege the existence of the contract, its breach, and the resulting damages. Thomas v. 10 Montelucia Villas, LLC, 302 P.3d 617, 621 (Ariz. 2013); see also Riverwalk Condo. Unit 11 Owners Ass’n v. Travelers Indem. Co., 2018 WL 3774084, at *2 (D. Ariz. June 28, 2018). 12 An enforceable contract requires “an offer, acceptance, consideration, a sufficiently 13 specific statement of the parties’ obligations, and mutual assent.” Buckholtz v. Buckholtz, 14 435 P.3d 1032, 1035 (Ariz. Ct. App. 2019) (citation omitted). 15 The only remaining Third Party Plaintiffs are the Shahs in their capacity as trustees. 16 See supra Section III.A. The Contract at issue is between the Shahs as individuals and 17 Prime1 and Masizo. (Doc. 46-1 (referencing Masizo’s Registrar of Contracts number and 18 stating “[t]his Contract Agreement (this “Agreement”) between Homeowner (Home 19 Owner”) [sic] and, Masizo & partner Prime1 Construction, LLC.”)). The Shahs’ only 20 argument is that they have now assigned their claims to the Trust, but that assignment was 21 improper. Supra Section III.A.2. No contract exists between the Third-Party Plaintiffs and 22 Masizo; so, the Breach of Contract Claim cannot proceed. Riverwalk Condo. Unit Owners 23 Ass’n v. Travelers Indem. Co., 2018 WL 3774084, at *2. 24 2. Unjust Enrichment 25 To state a claim for unjust enrichment, the Third-Party Plaintiffs must allege “(1) 26 an enrichment, (2) an impoverishment, (3) a connection between the enrichment and 27 impoverishment, (4) the absence of justification for the enrichment and impoverishment, 28 and (5) the absence of a remedy provided by law.” Freeman v. Sorchych, 245 P.3d 927, 1 936 (Ariz. Ct. App. 2011). “A claim for unjust enrichment may exist where a person 2 confers a benefit to his detriment on another [where] allowing the other to retain that benefit 3 would be unjust.” Baughman v. Roadrunner Commc’ns, LLC, 2014 WL 3955262, at *4 4 (D. Ariz. Aug. 13, 2014) (citing USLife Title Co. of Ariz. v. Gutkin, 732 P.2d 579 (Ariz. Ct. 5 App. 1986)). Under Arizona state law, “unjust enrichment is a flexible equitable remedy 6 which is ‘available whenever the court finds that the defendant . . . is obliged by the ties of 7 natural justice and equity to make compensation for the benefits received.’ ” Hannibal- 8 Fisher v. Grand Canyon Univ., 523 F. Supp. 3d 1087, 1097 (D. Ariz. 2021) (internal 9 citations omitted). Under Rule 8(d)(2), a party “may plead an unjust enrichment claim in 10 the alternative even if they are alleging the existence of a contract governing the dispute.” 11 Id. 12 Masizo argues that the Shahs have failed to make sufficient factual allegations of 13 the first element, enrichment, because there are no specific allegations of how Masizo was 14 enriched. (Doc. 55 at 13–14). However, the Shahs have alleged that “Prime1, Aguilar, 15 and Masizo acted in concert with one another in a coordinated and deliberate conspiracy” 16 (Doc. 46 at ¶ 38); that “Aguilar acted as an agent of Masizo” (Id. at ¶ 39); that “Prime1, 17 Aguilar, and Masizo are alter egos of one another” (Id. at ¶ 41); and that a representative 18 of Masizo told them that it knew Prime1 was using its license number (Id. at ¶¶ 30–31). In 19 addition, the Contract contained numerous references to Masizo. (Doc. 46-1). 20 Masizo asserts that these statements are not supported by evidence and should be 21 discounted as bald legal conclusions (Doc. 64 at 7-8), but the Court must accept the Shah’s 22 allegations as true when evaluating a motion to dismiss. The allegations that Aguilar was 23 an agent of Masizo and that Masizo, Aguilar, and Prime1 are alter egos make it plausible 24 that Masizo was enriched if Aguilar was enriched. Baughman, 2014 WL 3955262, at *4. 25 Indeed, the Shahs allege that Aguilar was enriched when he withdrew the majority of the 26 $125,000 from Prime1’s account. (Doc. 46 at ¶ 35). This is sufficient to state a plausible 27 claim for relief for unjust enrichment. See Freeman, 245 P.3d at 936. 28 / / / 1 3. Fraud 2 To state a claim for fraud under Arizona law, the Third Party Plaintiffs must allege 3 “(1) a representation; (2) its falsity; (3) its materiality; (4) the speaker’s knowledge of its 4 falsity or ignorance of its truth; (5) the speaker’s intent that it be acted upon by the recipient 5 in the manner reasonably contemplated; (6) the hearer’s ignorance of its falsity; (7) the 6 listener’s reliance on its truth; (8) the right to rely on it; and (9) his consequent and 7 proximate injury.” Wells Fargo Credit Corp. v. Smith, 803 P.2d 900, 905 (Ariz. Ct. App. 8 1990). 9 Masizo challenges the Fraud Claim on the grounds that (1) the Trust was not party 10 to the Contract (Doc. 55 at 13), (2) Masizo lacked intent to induce the Shahs to allegedly 11 lie to Wells Fargo (Doc. 64 at 8); (3) there is no nexus between the injury here and the 12 original Complaint (Doc. 55 at 14), and (4) the Shahs have not suffered consequent and 13 proximate injury. (Id.) 14 First, the formation of a contract is not one of the elements of fraud. See Smith, 803 15 P.2d at 905. More importantly, the Fraud Claim is not that the Shahs were fraudulently 16 induced to form a contract, but that Masizo made a false material representation to the 17 Shahs upon which they relied to decide to pay Prime1. (Doc. 46 at ¶ 49). Although the 18 Trust was not a party to the Contract, the payment to Prime1 came from the Trust’s account 19 with Wells Fargo. (Doc. 1 at ¶ 22). Therefore, the Shahs, as trustees, have plausibly 20 alleged that they relied on Masizo’s allegedly false material representation. See Smith, 803 21 P.2d at 905 (“the listener’s reliance on its truth”). 22 Second, Masizo maintains that the Fraud Claim should be dismissed because 23 Masizo did not intend to induce the Shahs to allegedly make a misrepresentation to Wells 24 Fargo. (Doc. 64 at 8). But the element of intent in a Fraud Claim requires something else: 25 Masizo must have intended that the Shahs “act[] upon” the representation it made to the 26 Shahs. See Dillon v. Zeneca Corp., 42 P.3d 598, 603 (Ariz. Ct. App. 2002) (“[F]raudulent 27 misrepresentation requires a false misrepresentation made . . . with the intent that it be acted 28 upon by the listener.” (citation omitted)). Here, the Shahs have plausibly alleged that 1 Masizo knowingly allowed Prime1 to make contracts using its license number to seem 2 legitimate. (Doc. 46 at ¶ 38). They have presented a factual basis for this allegation 3 through the mentions of Masizo in the Contract (Doc. 46-1) and the alleged statements of 4 Masizo’s owner. (Doc. 46 at ¶¶ 30–31). 5 Third, Masizo contends that the Fraud Claim fails because there is no nexus between 6 the consequent and proximate injury suffered here and the original Complaint. 7 (Doc. 55 at 14–15). By this, it means that any alleged fraud by Masizo could not have 8 directly caused the Shahs to be liable to Wells Fargo based on the facts of the original 9 Complaint. However, as explained earlier, a third-party defendant need not be liable to the 10 original plaintiff. Supra Section III.A. That is, a third-party claim does not require the 11 third-party defendant’s wrongdoing to be directly responsible for the original plaintiff’s 12 harm. Bahrampour, 356 F.3d at 978. So, the Shahs have no need to allege that the 13 consequent and proximate injury here are the exact same as those in the original Complaint. 14 See id. 15 Finally, Masizo believes that the Shahs have suffered no consequent and proximate 16 injury because Wells Fargo allegedly reversed the payment from the Shahs to Prime1. 17 (Doc. 55 at 14-15). But the Court must accept the Third-Party Plaintiff’s allegations as 18 true when evaluating a motion to dismiss. Here, the Shahs have plausibly alleged that they 19 have suffered damages from paying $125,000 to Prime1 (Doc. 60 at 14) and they assert 20 that Masizo’s liability to the Trust is contingent on the Trust’s liability to Wells Fargo. 21 (Doc. 46 at ¶ 37). Thus, the Shahs have pled sufficient factual content to state a fraud claim 22 that is plausible on its face. Smith, 803 P.2d at 905. 23 As such, the Shahs’ remaining claims are the Fraud and Unjust Enrichment Claims. 24 C. Leave to Amend 25 A court should “freely give leave [to amend] when justice so requires,” Fed. R. Civ. 26 P. 15(a)(2), “unless it determines that the pleading could not possibly be cured by the 27 allegation of other facts.” Lacey v. Maricopa Cnty., 693 F.3d 896, 926 (9th Cir. 2012) (en 28 banc) (citation omitted). Typically, a district court should not dismiss a complaint with 1 || prejudice if an amendment could save the complaint. Thinket Ink Information Resources, 2|| Inc. v. Sun Microsystems, Inc., 368 F.3d 1053, 1061 (9th Cir. 2004). Leave to amend may 3 || be denied when “the court determines that the allegation of other facts consistent with the 4|| challenged pleading could not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv- 5|| Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986). In sum, leave to amend “‘is 6|| properly denied [where] amendment would be futile.” Carrico v. City and Cty. of San 7|| Francisco, 656 F.3d 1002, 1008 (9th Cir. 2011). 8 Here, the Court dismisses only the Third-Party Plaintiffs’ breach of contract claim 9|| and does not grant the Third-Party Plaintiffs leave to amend their Third-Party Complaint 10 || because the Trust was not party to the Contract, so any amendment would be futile. See 11 Carrico, 656 F.3d at 1008. 12 Accordingly, 13 IT IS ORDERED that Third-Party Defendant Masizo’s Motion to Dismiss (Doc. 55) is GRANTED in part and DENIED in part as follows: 15 e The claims for Breach of Contract, Unjust Enrichment, and Fraud brought 16 by the Third-Party Plaintiffs Shahs in their individual capacities are 17 DISMISSED with prejudice. 18 e The Breach of Contract claim brought by Third-Party Plaintiffs Shahs in their 19 capacity as trustees of the Ankur & Ruchi Shah Family Trust is also 20 DISMISSED with prejudice. 21 e The Motion to Dismiss is DENIED as to the Shahs’ claims for Fraud and 22 Unjust Enrichment in their capacity as trustees of the Ankur & Ruchi Shah 23 Family Trust. 24 Dated this 16th day of June, 2025. 25 fe La 26 norable' Diang4. Huretewa United States District Judge 28
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