Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-3_07-cv-00063/USCOURTS-azd-3_07-cv-00063-4/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Contract Dispute

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Conrad Larson,

Plaintiff, 

vs.

Rodger Johnson, et al.,

Respondents. 

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No. CV 07-00063-PCT-SMM

ORDER

Pending before the Court is a Motion for Leave to Amend Complaint (Dkt. 32) filed

by Plaintiff Conrad Larson. Defendants’ Swanson and Johnson oppose Plaintiff’s motion

on the grounds that the proposed amendment is futile. Having considered the parties’

arguments, the Court issues the following order.

BACKGROUND

A. Factual History

Plaintiff Conrad Larson (“Plaintiff”) alleges that on March 16, 2004, he entered into

an employment agreement (“Agreement”) with Defendant Guy Kittelson (“Kittelson”) for

the project management and sale of property in Bullhead City, Mohave County, Arizona.

(Dkt. 1, Ex.1, Compl. ¶¶ 19, 20.) (“Compl.”) According to Plaintiff, he was hired to manage

a project that included the development of land into residential property, a golf course, and

a hotel. (Compl. ¶ 21.) Plaintiff claims that, pursuant to the Agreement, he was to receive

one percent (1%) of any “outside sale” of the project, (Compl. ¶ 20), and a loan of one

Case 3:07-cv-00063-SMM Document 41 Filed 02/11/08 Page 1 of 6
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1

Obed Williamson is deceased (Dkt. 6 at 1) and not a party to this action.

2

Plaintiff's complaint does not clearly state whether: (1) the sale occurred before the

formation of the partnership between the defendants, or (2) the formation of the partnership itself

constituted a sale of the property. Plaintiff does not state the date of the sale or when Kittelson,

Johnson and Swanson allegedly became partners.

3

The phrase “percent of purchase” in plaintiff's complaint is not clear in its reference, but

likely refers to the “1% to Conrad [Larson] on outside sales” stated in the handwritten document

signed by Kittelson. (Dkt. 1, Exhibit 1A).

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thousand dollars ($1,000) per week “until funding was max of $3000.00.” (Compl. ¶ 27.)

Plaintiff also claims that he is entitled to compensation for his efforts in obtaining the City

of Bullhead’s cooperation for the project and procuring potential buyers of the property.

(Compl. ¶¶ 11-12.)

The Agreement is evidenced by two documents, one handwritten and one typed, each

signed and dated by Kittelson. (Dkt. 1, Ex. 1A.) The handwritten document, titled “Project

Management Contract for Conrad Larson on Canyon Hills,” lists a number of terms. (Id.)

The document is signed by Kittelson as “president” and by Obed Williamson.1

 (Id.) The

typed document, titled “Canyon Hills Country Club and Estates,” is similar to the

handwritten document and contains the same terms as the handwritten document, among

other items. (Id.) The typed document is also signed by Kittelson as “president.” (Id.) 

Kittelson asserts that he signed the Agreement as a representative of Cashel, Inc.; however,

“Cashel, Inc.” does not appear on either the typed or handwritten version of the Agreement.

(Id.)

Plaintiff alleges that: (1) after the Agreement was made, he used his “unique skills”

and connections to procure potential buyers (Compl. ¶ 22); (2) he helped sell the property to

Defendants Clay Swanson (“Swanson”) and Rodger Johnson (“Johnson”), who became

partners with Kittelson2

 (Compl. ¶ 24); (3) he was never paid the 1% commission on outside

sales as stated in the Agreement for the sale of the property to Johnson and Swanson (Compl.

¶ 26); (4) Kittelson failed to pay Plaintiff the loan and “percent of purchase” stipulated in the

Agreement3

 (Compl. ¶ 28). 

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Plaintiff further alleges that once Johnson, Swanson and Kittelson formed a

partnership, Johnson and Swanson asked Plaintiff to continue working on the project and

renewed the Agreement, thereby assuming its obligations. (Compl. ¶ 9-10.) According to

Plaintiff, while Johnson and Swanson were partners with Kittelson, he made arrangements

with the City of Bullhead that were instrumental in bringing potential buyers to the property.

(Compl. ¶¶ 11-12.) Plaintiff asserts that his efforts enabled Johnson and Swanson to contact

a final purchaser and sell the property. (Compl. ¶¶ 13, 15.) Plaintiff claims that he was only

paid a stipend to cover his expenses, but never received a “salary or commission.” (Compl.

¶ 25.)

Plaintiff claims that Kittelson is liable for the loan amount stated in the Agreement as

well as the commission for the sale of the property to Johnson and Swanson. Plaintiff claims

that Johnson and Swanson owe him a commission for the final sale of the property and

compensation for his work procuring the City of Bullhead’s cooperation and potential buyers.

B. Procedural History

Originally filed in the Superior Court of Arizona, Mohave County, on November 27,

2006, this action was removed to this Court on January 8, 2007 pursuant to 28 U.S.C. §§

1332, 1441, and 1446. (Dkt. 1, Not. of Removal.)

Johnson and Swanson first sought dismissal of this action on January 26, 2007 (Dkt.

6, Defs.’ Mot. to Dismiss.), on the grounds that they were not liable under the written

agreements because they were not signatories. In response to that motion, Plaintiff argued

that Johnson and Swanson could be held liable on the theory of “implied partnership

assumption of Plaintiff’s contractual obligation.” (Dkt. 10, Pl.’s Resp. at 4.) In reply,

Johnson and Swanson argued that they did not assume the contract simply by becoming

partners with Kittleson, and that Plaintiff’s theory of implied liability failed to meet the

requirements of the Statute of Frauds, A.R.S. §44-101. (Dkt. 12, Defs.’ Resp. at 4.) The

Court found that the complaint sufficiently alleged formation of an implied contract, and

declined to address the Statute of Frauds argument because it was raised for the first time in

the reply brief. (Dkt. 18, Order dated July 12, 2007, at 6-7.) 

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On July 23, 2007, Defendants Johnson and Swanson filed a second motion to dismiss

raising a new Statute of Frauds argument. (Dkt. 19, Defs.’ Mot. to Dismiss.) In response

to Defendants’ second motion to dismiss, Plaintiff argued that the full performance of his

obligations took the contract out of the Statute of Frauds. (Dkt. 21, Pl. Resp. at 6-9.) The

Court found that the Statute of Frauds barred Plaintiff’s breach of contract claim against

Defendants Johnson and Swanson; and therefore, the complaint failed to state a claim for

which relief can be granted. (Dkt. 28, Order dated Nov. 16, 2007, at 8-9.) 

On December 6, 2007, Plaintiff filed a Motion for Leave to Amend the Complaint

against Defendants Johnson and Swanson. (Dkt. 32, Pl.’s Mot. to Am.) Plaintiff’s lodged

first amended complaint (“FAC”) alleges that Plaintiff is entitled to recover under a theory

of unjust enrichment. Defendants oppose the amendment, arguing that the Statute of Frauds

applies regardless of the theory alleged.

STANDARD OF REVIEW

Plaintiff has the right to amend its complaint once “as a matter of course” any time

before a responsive pleading is served. Fed. R. Civ. P. 15(a). A motion to dismiss is not a

“responsive pleading” within the meaning of Rule 15, and neither the filing nor granting of

such a motion before the answer terminates the right to amend. Fed. R. Civ. P. 7(a); Doe v.

United States, 58 F.3d 494, 497-498 (1995). Except for amendments made “of course” or

pursuant to stipulation, leave of court is required to amend a pleading. Fed. R. Civ. P. 15(a).

The rules require that leave to amend should be freely granted “when justice so requires.”

Id. The Supreme Court has identified four relevant factors in determining whether a leave

to amend pleadings should be denied: undue delay, bad faith or dilatory motive, futility of

amendment, and prejudice to the opposing party. Foman v. Davis, 371 U.S. 178, 182, 83

S.Ct. 227, 230 (1962). A proposed amendment is “futile” only if no set of facts can be

proven under the amendment which would constitute a valid claim or defense. Miller v.

Rykoff-Sexton, Inc., 845 F.2d 209 (9th Cir. 1988). “Where there is a lack of prejudice to the

opposing party and the amended complaint is obviously not frivolous, or made as a dilatory

maneuver in bad faith, it is an abuse of discretion to deny such a motion.” Howey v. United

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States, 481 F.2d 1187, 1190-91 (9th Cir. 1973). When exercising its discretion to deny leave

to amend, “a court must be guided by the underlying purpose of Rule 15 to facilitate

decisions on the merits, rather than on the pleadings or technicalities.” United States v.

Webb, 655 F.2d 977, 979 (9th Cir. 1981). 

DISCUSSION

Notwithstanding Plaintiff’s right to amend as a matter of course, the Court finds

Plaintiff should be allowed to amend his Complaint because Plaintiff’s claim is not futile as

a matter of law. In light of some of the additional facts that can be proven under the

amendment, the sufficiency of the unjust enrichment claim would be better determined

through other appropriate motions under Rule 12 or 56 of the Federal Rules of Civil

Procedure.

Unjust enrichment occurs when a person retains the benefit of a bargain, which in

justice and equity belong to another. City of Sierra Vista v. Cochise Enterprises, Inc., 144

Ariz. 375, 381, 697 P.2d 1125, 1131 (App. 1984). In Arizona, recovery under the theory of

unjust enrichment requires the following: (1) an enrichment; (2) an impoverishment; (3) a

connection between the enrichment and the impoverishment; (4) absence of justification for

the enrichment and the impoverishment and (5) an absence of a remedy provided by law. Id.

Defendants argue that Plaintiff should not be allowed to amend his Complaint because the

unjust enrichment claim is futile. (Dkt. 37, Defs.’ Resp. at 10-12.) Defendants recognize

that a party may amend a pleading once as a matter of course at any time before a responsive

pleading is served, but argue that under these facts the amendment would be futile and thus

should be denied. (Dkt. 37, Defs.’ Resp. at 2.) However, a proposed amendment is “futile”

only if no set of facts can be proven under the amendment which would constitute a valid

claim or defense. Miller, 845 F.2d at 214. It is then that the denial of leave to amend would

be proper. Courts are reluctant to deny leave to amend, which would be in contradiction to

the spirit of the federal rules, absent prejudice or bad faith. Howey, 481 F.2d at 1990-91. 

Plaintiff alleges sufficient facts under an unjust enrichment theory to allow the

Amended Complaint to proceed. Plaintiff asserts that Defendants Swanson and Johnson

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entered into a partnership with Defendant Kittleson and asked Plaintiff to continue his work

under the “Project Management Contract” and through this continued work by Plaintiff,

Defendants Swanson and Johnson benefited. Plaintiff also asserts that he was not paid for

the services he rendered, from which Defendants Swanson and Johnson benefited, and no

other remedy is available to Plaintiff to recover for these losses. Thus he seeks to amend his

Complaint and include an unjust enrichment claim.

Defendants further argue that Plaintiff cannot circumvent the Statute of Frauds by

recasting his claim under the theory of unjust enrichment. They argue that the purpose of the

Statute of Frauds would be frustrated if Plaintiff is allowed to go forward under an unjust

enrichment claim and thus the Court should reject the amendment. At this juncture, the

Court cannot say the proposed amendment is futile as a matter of law. After filing of the

FAC, Defendants may seek to dismiss the unjust enrichment claim pursuant to Rule 12, or

may seek summary judgment in accordance with Rule 56, or both. 

CONCLUSION

Having considered Plaintiff’s Motion for Leave to Amend Complaint, the Court finds

that proposed amendment to the Complaint is not futile and grants leave to amend Plaintiff’s

Complaint. Accordingly,

IT IS HEREBY ORDERED granting Plaintiff’s Motion to Amend. (Dkt. 32.)

IT IS FURTHER ORDERED directing the Clerk to file Plaintiff’s Lodged Amended

Complaint. (Dkt. 33.)

DATED this 11th day of February, 2008.

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