Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_13-cv-01312/USCOURTS-azd-2_13-cv-01312-6/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1330 Breach of Contract

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Ken Gazian, et al., 

Plaintiffs, 

v. 

Wells Fargo Bank NA, 

Defendant.

No. CV-13-01312-PHX-DGC

ORDER 

 Two days before the final pretrial conference, Plaintiffs filed a motion asking the 

Court to reopen discovery and to sanction Defendant Wells Fargo. Doc. 213. Plaintiffs 

base their motion on emails that Wells Fargo recently produced. They argue that the 

emails are key evidence in support of their claim that Wells Fargo committed fraud, and 

that the emails should have been produced earlier. After reviewing the parties’ briefing 

on this issue, the Court will allow limited additional discovery as set forth below. 

I. Background. 

Plaintiffs in this case are Ken Gazian, Pierre Investments, Inc., and Aragadz 

Foods, Inc., d/b/a Devanche Jewelers. Gazian is a Texas resident and both Pierre and 

Devanche are Texas corporations wholly owned by Gazian. Plaintiffs originally brought 

this action against Wells Fargo, Kelly & Kelly PC, and Hubert Kelly based on an 

allegedly fraudulent scheme perpetrated by the Kelly Defendants. Plaintiffs allege that 

$80,000 was transferred to the Kelly Defendants’ Wells Fargo account for the “purchase 

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of securities allegedly posted on the London Stock Exchange.” Doc. 101, ¶ 10. The 

securities transaction was represented “as having a total value in excess of $45,000,000,” 

and Plaintiffs were to receive “a return of $280,000.” Id.

 Plaintiffs allege that they “sought assurance from Wells Fargo” that the Kelly 

Defendants were legitimate business people and were in the process of putting together a 

large securities transaction. Id. Wells Fargo employees from a branch in Mesa, Arizona 

allegedly represented to Plaintiffs “on multiple occasions that there was a transaction 

being put together for the purchase of the securities, that funds were present for the 

purchase of securities, and that Wells Fargo had undertaken numerous successful 

transactions” with the Kelly Defendants. Id., ¶ 11. 

 Plaintiffs assert that they were convinced by the Kelly Defendants in October 2011 

to reinvest $250,000 of the promised $280,000 to “fund a $5,000,000 loan to purchase 

and renovate the Park Plaza Tower,” an office building in Dallas. Id., ¶ 16. Plaintiffs 

also agreed to pay an additional $50,000 to fund the transaction. Id. Plaintiffs assert that 

on November 29, 2011, when they attempted to withdraw $30,000 and transfer $250,000 

to the Kelly Defendants as agreed, they “were informed by Wells Fargo that the accounts 

had been emptied and that Wells Fargo would not transfer any amount to Plaintiffs 

pursuant to the Irrevocable Commitment.” Id., ¶ 21. 

 The Court dismissed the Kelly Defendants from this case pursuant to stipulation. 

Docs. 58, 151. The primary claims that remain are Plaintiffs’ claims that Wells Fargo 

knowingly or negligently made false representations to Plaintiffs that the Kelly 

Defendants were “reputable businessmen” and that their transactions were “legitimate.” 

Doc. 101, ¶¶ 30-63. 

III. Relevancy of the Email. 

On February 10, 2015, more than eight months after the close of discovery, Wells 

Fargo disclosed to Plaintiffs a set of emails. Plaintiffs argue that one of these emails, 

from Patrick Brown, strongly supports their claim that Wells Fargo committed fraud by 

failing to inform them that transactions with the Kelly Defendants were suspect. The 

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email states: 

From: BROWN, Patrick [Wells Fargo] 

Sent: Tue 8/2/2011 5:36:42 PM 

Re: HSBC Bank Guarantee Registration Number BH5843[.] 

I have conducted a review on the signor, Craig Cason, for this account, [redacted]7443 – Increase Capital Investments LLC and found several items of concern . . . 

 This individual has been investigated by the SEC for securities 

violations and accusations of fraud. 

 The address on the account is a virtual office that can be rented for 

$50/month, used frequently by shell companies to give the appearance of legitimacy even though no actual business is conducted there. 

 The client has filed multiple bankruptcies and has several outstanding judgments (some in excess of $100K), which is not 

consistent with someone purporting to have $250mil in assets. 

Please do not process the receipt of this security. We will be restricting the account and referring the matter to our Security Fraud group. Additionally, please DO NOT disclose this information to the client or the outcome of 

our review. Please advise the client that we cannot assist him with his 

request. 

Doc. 213-3 at 2. The parties disagree on the relevance of this email. Plaintiffs argue that 

the Brown email proves Wells Fargo knew the securities transaction underlying 

Plaintiffs’ deal with the Kelly Defendants was fraudulent. Wells Fargo argues that the 

email concerns a securities transaction different from the transaction that formed the basis 

for Plaintiffs’ deal with the Kelly Defendants, and that Wells Fargo produced the email 

only out of an abundance of caution. 

 Although the Court cannot conclude at this stage that the email from Patrick 

Brown concerned the securities transaction underlying Plaintiffs’ deal with the Kelly 

Defendants, the email is relevant to Plaintiffs’ claims. Wells Fargo employee Randy 

Lucero was a recipient of the Brown email. Lucero was also the person who talked with 

Plaintiffs about their concerns regarding the propriety of transactions with the Kelly 

Defendants. The email suggests that an affiliate of the Kelly Defendants in a securities 

transaction (Cason) may be a shady character. Lucero’s knowledge of this fact is 

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relevant to whether he should, as Plaintiffs allege, have assured them that the Kelly 

Defendants were engaged in a legitimate transaction. In addition, a separate email sent 

by the Kelly Defendants to Lucero uses the same HSBC Bank registration number 

mentioned in the Brown email, suggesting that the Brown email may in fact have been 

addressing the same transaction that formed the basis for Plaintiffs’ deal with the Kelly 

Defendants. Doc. 213-4 at 8. 

The email is probative of Plaintiffs’ claim that Wells Fargo knew the Kelly 

Defendants’ business dealings were not legitimate. The email and related documents 

should have been disclosed by Wells Fargo during discovery in this case. The email is 

responsive to Plaintiffs’ Requests for Production No. 4 (“All documents evidencing your 

relationship with Kelly & Kelly, Kelly, or Miko Wady, including all documents 

identified by you in your response to Plaintiff Ken Gazian’s interrogatory No. 5-7”), and 

No. 18 (“All documents evidencing any investigations, background checks . . . or due 

diligence you performed on Hubert Kelly, Kelly & Kelly . . . or anyone else involved in 

the Transactions[.]”). Doc. 213 at 11. In addition, interrogatories requested a description 

the Kelly Defendants’ transaction history with Wells Fargo and included a request to 

identify all employees and documents involved in these transactions. Doc. 213-8 at 6. 

IV. Remedy. 

Plaintiffs ask the Court to reopen discovery so that they may depose the recipients 

of this email about its contents. Alternatively or additionally, Plaintiffs ask the Court to 

admit the relevant emails into evidence over Defendant’s objections and to sanction 

Wells Fargo by striking its agency defense. 

 A motion to reopen discovery is a motion to modify the discovery deadline set in 

the Court’s scheduling order. Rule 16(b)(4) permits a scheduling order to be modified 

only on a showing of good cause. See Johnson v. Mammoth Recreations, Inc., 975 F.2d 

604, 609 (9th Cir. 1992). Plaintiffs have shown good cause for reopening discovery. 

Defendants did not disclose a relevant piece of evidence until February 10, 2015, more 

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than eight months after the close of discovery.1

 The Court finds that a limited reopening of discovery is appropriate. The Court 

will permit Plaintiffs to conduct up to 5 additional depositions totaling no more than 20 

hours of deposition time. These may include a further deposition is Randy Lucero if 

Plaintiffs elect to re-depose him. Wells Fargo shall cooperate with Plaintiffs in arranging 

these depositions, including contacting witnesses and arranging for their appearances, if 

necessary. The Court will also permit Plaintiffs to serve 10 additional document 

production requests (including subparts) and 10 additional interrogatories (including 

subparts). These additional written discovery requests shall be served within 14 days of 

this order. The additional depositions and written discovery may inquire into the steps 

Wells Fargo took to preserve emails sent to and from Lucero. 

This additional discovery shall be completed, including all Wells Fargo responses 

to the additional written discovery, by August 28, 2015. The parties shall place a joint 

conference call to the Court on June 5, 2015, at 4:00 p.m., to set a firm trial date. The 

Court plans to complete the trial of this case before the end of 2015. The Court will hold 

a status conference on September 4, 2015, at 3:30 p.m., to discuss any further issues that 

must be resolved before trial. 

The Court concludes that Plaintiffs have not made the showing necessary for the 

harsh sanction of striking Wells Fargo’s agency defense. Plaintiffs have not shown the 

connection between the alleged senior officers, the transaction at issue in this case, and 

Wells Fargo itself. Nor have Plaintiffs shown that Wells Fargo’s late disclosure of the 

email was willful. The Court will not order that the newly disclosed documents are 

admissible, although Plaintiffs may certainly assert their admissibility at trial. 

 

 

1

 Wells Fargo argues that Plaintiffs failed to depose Bill Gilligan when afforded 

the opportunity, but Plaintiffs did not know the information contained in the laterdisclosed email – information that would have made Gilligan’s deposition more relevant. 

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IT IS ORDERED that Plaintiffs’ motion to re-open discovery and for sanctions 

(Doc. 213) is granted in part and denied in part as set forth above. 

Dated this 29th day of May, 2015. 

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