Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_16-cv-00078/USCOURTS-azd-2_16-cv-00078-0/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:1332 Diversity-Fraud

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WO NOT FOR PUBLICATION 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Bridgepoint Construction Services

Incorporated, et al., 

Plaintiffs, 

v. 

James Lassetter, 

Defendant.

No. CV-16-00078-PHX-JJT

ORDER 

 At issue is Defendant James Lassetter’s Motion to Dismiss (Doc. 14, MTD), to 

which Plaintiffs Bridgepoint Construction Services, Inc. and Norm Salter filed a 

Response (Doc. 15, Resp.) and Defendants filed a Reply (Doc. 16, Reply). The Court 

heard oral argument on the Motion on June 27, 2016. (Doc. 18.) For the reasons that 

follow, the Court grants Defendant’s Motion to Dismiss. 

I. BACKGROUND 

In the Complaint (Doc. 1, Compl.), Plaintiffs allege the following facts. Non-party 

Martin Newton formed Vista Oceano La Mesa Venture LLC (“Vista”) to develop a real 

estate project in Santa Barbara, California. (Compl. ¶ 21.) Newton also formed Plaintiff 

Bridgepoint Construction Services, Inc. (“Bridgepoint”) with his cousin, Plaintiff Norm 

Salter, which provided construction services for the project. (Compl. ¶¶ 15, 21.) In order 

to complete the project and qualify for a $9.45 million bank loan, Newton contacted 

Defendant, who agreed to join the project through his entity Tenacious Adventures LLC 

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(“Tenacious”). (Compl. ¶¶ 19, 22.) Tenacious invested $3 million, and Vista was 

restructured with Tenacious as the sole member and Point III Holdings LLC (“Point 

III”)—solely owned by Newton—as the manager. (Compl. ¶¶ 22, 23.) Unforeseen 

conditions and increased costs caused the project to be over budget and underfunded. 

(Compl. ¶¶ 27, 28, 35.) Part of this shortfall was made up by Bridgepoint using its own 

funds. (Compl. ¶ 36.) Vista and Bridgepoint drafted an amended development services 

agreement, during which time Newton, with the alleged knowledge and approval of 

Defendant, represented to Plaintiffs that they would share in the profits of the project by 

receiving Point III’s share of the waterfall profit-sharing provision in the Vista operating 

agreement. (Compl. ¶¶ 31, 32.) Newton and Defendant also orally promised that 

Bridgepoint would be paid first, before any other amounts were paid to anyone except the 

bank. (Compl. ¶ 38.) 

 Plaintiffs allege Newton made these representations in the ordinary course of his 

responsibilities as manager of Vista, with Defendant’s knowledge, participation, 

encouragement, and consent. (Compl. ¶ 57.) Plaintiffs allege that both Newton and 

Defendant knew that these representations were false and made them with the intent to 

defraud Plaintiffs. (Compl. ¶ 52.) Plaintiffs further allege that Newton and Defendant 

knowingly and willfully conspired to cause a breach of fiduciary duties owed by Newton 

to Plaintiffs, by requiring and encouraging Plaintiffs to finance the construction project 

without any intention of reimbursing them. (Compl. ¶ 70.) 

 In the end, Vista earned a $7.3 million profit on the project, and Plaintiffs allege 

$6.9 million “was diverted to Defendant in Arizona in order to render Vista judgment 

proof.” (Compl. ¶ 45.) Plaintiffs therefore claim Defendant became indebted to Plaintiffs 

for money had and received by Defendant for the use and benefit of Plaintiffs. (Compl. 

¶ 85.) Plaintiffs also claim Bridgepoint has not received its orally promised share of the 

profits from the project. (Compl. ¶ 43.) 

 Based on the preceding allegations, Plaintiffs bring the following claims against 

Defendant: Conspiracy to Commit Fraud (Count I), Conspiracy to Breach a Fiduciary 

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Duty (Count II), Fraudulent Transfer (Count III), and Money Had and Received (Count 

IV). (Compl. ¶¶ 48–89.) Defendant now moves to dismiss all of Plaintiffs’ claims against 

him. 

II. LEGAL STANDARD 

Rule 12(b)(6) is designed to “test[] the legal sufficiency of a claim.” Navarro v. 

Block, 250 F.3d 729, 732 (9th Cir. 2001). To survive dismissal for failure to state a claim 

pursuant to Rule 12(b)(6), a complaint must contain more than “labels and conclusions” 

or a “formulaic recitation of the elements of a cause of action”; it must contain factual 

allegations sufficient to “raise a right to relief above the speculative level.” Bell Atl. 

Corp. v. Twombly, 550 U.S. 544, 555 (2007). While “a complaint need not contain 

detailed factual allegations . . . it must plead ‘enough facts to state a claim to relief that is 

plausible on its face.’” Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1022 (9th Cir. 

2008) (quoting Twombly, 550 U.S. at 570). “A claim has facial plausibility when the 

plaintiff pleads factual content that allows the Court to draw the reasonable inference that 

the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 

(2009) (citing Twombly, 550 U.S. at 556). The plausibility standard “asks for more than a 

sheer possibility that a defendant has acted unlawfully.” Id.

 When analyzing a complaint for failure to state a claim for relief under Federal 

Rule of Civil Procedure 12(b)(6), the well-pled factual allegations are taken as true and 

construed in the light most favorable to the nonmoving party. Cousins v. Lockyer, 568 

F.3d 1063, 1067 (9th Cir. 2009). Legal conclusions couched as factual allegations are not 

entitled to the assumption of truth, Ashcroft v. Iqbal, 556 U.S. 662, 680 (2009), and 

therefore are insufficient to defeat a motion to dismiss for failure to state a claim. In re 

Cutera Sec. Litig., 610 F.3d 1103, 1108 (9th Cir. 2010). 

III. ANALYSIS 

 As a threshold matter, the Court must decide which state’s substantive law applies 

in this dispute. This is a diversity action under 28 U.S.C. § 1332. When a federal court 

sits in diversity, it must look to the forum state's choice of law rules to determine the 

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controlling substantive law. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 

(1941). Arizona’s choice-of-law test looks for the state with the most significant 

relationship to the claim. Bobbitt v. Milberg LLP, 801 F.3d 1066, 1071 (9th Cir. 2015). 

 The choice of law analysis in this case is straightforward. The underlying 

transaction in this dispute is a land development project in California. The alleged 

fraudulent misrepresentations took place in California and the potential damage would be 

felt by a California corporation and a California citizen. The only connection to Arizona 

is Defendant’s Arizona citizenship. Therefore, the Court finds the state of California has 

the most significant relationship to this claim and California law applies. 

 A. Conspiracy to Commit Fraud 

 Plaintiffs claim that Defendant and Newton conspired to defraud them of their 

share of money due from the project. (Compl. ¶¶ 48–63.) Where a plaintiff alleges fraud 

or misrepresentation, Federal Rule of Civil Procedure 9(b) imposes heightened pleading 

requirements. Specifically, “[a]verments of fraud must be accompanied by ‘the who, 

what, when, where, and how’ of the misconduct charged.” Vess v. Ciba-Geigy Corp. 

USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (quoting Cooper v. Pickett, 137 F.3d 616, 627 

(9th Cir. 1997)). The heightened pleading requirements of Rule 9(b) apply even where 

“fraud is not a necessary element of a claim.” Vess, 317 F.3d at 1106. So long as a 

plaintiff alleges a claim that “sounds in fraud” or is “grounded in fraud,” Rule 9(b) 

applies. Id. “While a federal court will examine state law to determine whether the 

elements of fraud have been pled sufficiently to state a cause of action, the Rule 9(b) 

requirement that the circumstances of the fraud must be stated with particularity is a 

federally imposed rule.” Id.

 Plaintiff’s Complaint does not state the circumstances that constitute the alleged 

fraud with the particularity required by Rule 9(b). The majority of the allegations in the 

Complaint are directed at conduct by Newton—or Newton and Defendant together—and 

the remaining claims against Defendant individually are insufficient. At oral argument, 

Plaintiffs cited Swartz v. KPMG, 476 F.3d 756 (9th Cir. 2007), to suggest they are not 

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required to allege the particular fraud or false statements made by each and every 

defendant or identify every detail in furtherance of the conspiracy. (June 27, 2016 Hr’g 

Tr. at 128-29.) However, Plaintiffs must identify, at a minimum, the role of Defendant in 

the alleged fraud. See Swartz, 476 F.3d at 765. And while Plaintiffs need not identify 

every detail, there must be enough detail to plausibly support their allegations against 

Defendant. See Vess, 317 F.3d at 1106. 

 Here, Plaintiffs’ claim fails to allege enough factual non-conclusory allegations to 

support the claim that Defendant conspired to commit fraud. The bulk of the allegations 

are against Newton and Defendant together, and the Complaint fails to allege any specific 

acts or role by Defendant. This is insufficient under Rule 9(b). Further, the Complaint 

fails to allege facts to support an inference that Defendant, and not Tenacious as sole 

member of Vista, had a role in the fraud. Without alter ego allegations, the Court cannot 

disregard the corporate forms of the parties to the alleged agreement, and the Court does 

not find enough facts in the Complaint to state a claim to relief against Defendant that is 

plausible on its face. Thus, the Court dismisses Plaintiffs’ claim of Conspiracy to Commit 

Fraud (Count I), but grants Plaintiffs leave to amend if they can allege facts to plausibly 

support an inference that Defendant is individually liable and had a specific role in the 

conspiracy to commit fraud. 

 B. Conspiracy to Breach Fiduciary Duty 

 Plaintiffs claim Defendant conspired with Newton to cause a breach of fiduciary 

duties owed by Newton to Plaintiffs. (Compl. ¶¶ 64–76.) Liability arising from 

conspiracy assumes that the co-conspirator is legally capable of committing the 

underlying tort or that he or she owes a duty to plaintiff recognized by law. Applied 

Equip. Corp. v. Litton Saudi Arabia Ltd., 869 P.2d 454, 457 (Cal. 1994). A non-fiduciary 

cannot conspire to breach a duty owed only by a fiduciary. Am. Master Lease LLC v. 

Idanta Partners, Ltd., 171 Cal. Rptr. 3d 548, 566 (Ct. App. 2014) (citing Everest Inv’rs 8 

v. Whitehall Real Estate Ltd. P’ship XI, 123 Cal. Rptr. 2d 297 (Ct. App. 2002)). 

 As a non-fiduciary, Defendant is legally incapable of breaching the fiduciary duty 

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owed to Plaintiffs. The underlying dispute in this Complaint involves a transaction 

between Bridgepoint and Vista, and Defendant is at least three levels removed from any 

dealings with Plaintiffs. Defendant is the sole member of Tenacious, which in turn is the 

sole member of Vista, which was involved in an arm’s length transaction with Plaintiff 

Bridgepoint, of which Plaintiff Salter is a minority shareholder. Considering the nonconclusory allegations of the Complaint, it is less than plausible that Defendant had any 

individual responsibility or owed any fiduciary duty to Plaintiffs. Because Defendant 

cannot commit a breach of fiduciary duty, the underlying tort in the alleged conspiracy, 

he cannot be liable for a conspiracy to breach that duty. See Am. Master, 171 Cal. Rptr. 

3d at 566. Thus, the Court dismisses with prejudice Plaintiffs claim of Conspiracy to 

Breach a Fiduciary Duty (Count II). 

 C. Fraudulent Transfer 

 Plaintiffs allege that Newton and Defendant “by and through their entities” 

conspired to delay, hinder, and defraud a creditor. (Compl. ¶¶ 77–83.) Under California 

law, a fraudulent transfer occurs when a debtor makes a transfer with actual intent to 

hinder, delay, or defraud any creditor of the debtor. Cal. Civil Code § 3439.04(a)(1). 

While Plaintiffs’ allegation mirrors the statutory language, the claim is self-defeating. 

Because this claim is against Defendant individually, Plaintiffs’ allegation that he acted 

by and through his entity precludes his individual responsibility. Thus, the Court 

dismisses Plaintiff’s claim of Fraudulent Transfer (Count III), but grants Plaintiffs leave 

to amend. 

 D. Money Had and Received 

 Plaintiffs claim Defendant is indebted to Plaintiffs for money intended for their 

benefit. (Compl. ¶¶ 84–89.) Under California law, a claim for money had and received 

arises when one person receives money which belongs to another. Avidor v. Sutter’s 

Place, Inc., 151 Cal. Rptr. 3d. 804, 816 (Ct. App. 2013). Plaintiffs further state that under 

California law they do not need to plead this claim with any specificity. (Resp. at 10.) 

However, while state law may apply to the elements of the claim, the federal pleading 

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rules still control. See Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 427 (1996) 

(noting federal courts sitting in diversity apply state substantive law and federal 

procedural law.) 

 Here, Plaintiffs have failed to allege facts to plausibly show how Defendant has 

their money, and more importantly, how he acquired this money in his individual 

capacity. As discussed, this dispute involves two entities: Bridgepoint and Vista. 

Plaintiffs’ allegations are that money or profits from the project were received by Vista 

(Compl. ¶ 45), the sole member of which was Tenacious. Without an alter ego claim, or a 

plausible fraudulent transfer claim, the Court cannot plausibly infer that Defendant is 

individually liable for receiving money Plaintiffs themselves allege was received by Vista 

but meant for Plaintiffs. 

 Further, because this claim is grounded in fraud, Plaintiffs must plead with the 

particularity required by Rule 9(b). See Vess, 317 F.3d at 1106. Plaintiffs allege that 

Defendant knew they had a claim to a portion of the funds from the project, and that 

Defendant, not Vista or Tenacious, somehow received their money over a two-year 

period. This is insufficient under Rule 9(b). As with Plaintiffs’ other claims, the Court 

cannot plausibly infer from Plaintiffs’ non-conclusory allegations that Defendant is 

individually liable to the Plaintiffs for Money Had and Received. Thus, the Court 

dismisses this claim (Count IV), but grants Plaintiffs leave to amend.

IV. CONCLUSION 

 The Court finds that Plaintiffs’ Complaint fails to meet the pleading requirements 

of Rules 8(a) and 9(b). Considering only the non-conclusory, factual allegations, 

Plaintiffs’ Complaint fails to state a claim under which relief can be granted. Further, 

because the allegations in the Complaint relate to a dispute surrounding an arm’s length 

transaction involving multiple entities, the Complaint fails to state how any of the alleged 

actions can be attributed to Defendant in his individual capacity. Therefore, the Court 

dismisses without prejudice Counts I, III, and IV. Because it does not appear Plaintiff can 

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cure the defects in Count II, Conspiracy to Breach a Fiduciary Duty, the Court dismisses 

it with prejudice. See Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000). 

IT IS THEREFORE ORDERED granting Defendant’s Motion to Dismiss (Doc. 

14). Count II of Plaintiffs’ Complaint is dismissed with prejudice, and Plaintiffs may 

amend Counts I, III, and IV. 

IT IS FURTHER ORDERED that Plaintiffs must file any Amended Complaint 

by August 2, 2016. If Plaintiffs fail to timely file an Amended Complaint, the Clerk of 

Court shall dismiss this action without further Order of the Court. 

 Dated this 19th day of July, 2016. 

Honorable John J. Tuchi

United States District Judge

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