Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_15-cv-01059/USCOURTS-cand-3_15-cv-01059-2/pdf.json

Nature of Suit Code: 290
Nature of Suit: Other Real Property Actions
Cause of Action: 28:1332 Diversity-Fraud

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SQUARE 1 BANK,

Plaintiff,

v.

HENRY LO, et al.,

Defendants.

Case No. 15-cv-01059-WHO 

ORDER DENYING MOTION TO 

DISMISS

Re: Dkt. No. 31

INTRODUCTION

This is one of the several civil and criminal cases in this district based on defendant 

Henry Lo’s defrauding of plaintiff Square 1 Bank (“Square One”) and other entities. Square One 

alleges that on the same date that Lo was first indicted, he transferred to his wife, defendant Jean 

Houston, the real property in which Lo and Houston were living at the time. Square One contends 

that this transfer was fraudulent under California’s Uniform Fraudulent Transfer Act (“UFTA”). 1 

It seeks, among other remedies, avoidance of the transfer to the extent necessary to satisfy its 

claims against Lo. Houston moves to dismiss, arguing that this Court lacks personal jurisdiction 

over her and that she cannot be sued for fraudulent transfer because she is not a debtor to Square 

One.

There is no need for a hearing on this motion and the hearing set for September 9, 2015 is 

VACATED. Square One has made a prima facie showing of personal jurisdiction, and Houston 

has failed to show that Square One cannot bring its UFTA claims against her, the transferee of the 

purported fraudulent transfer. Her motion is DENIED.2

 

1 After this case was filed, the California Legislature passed legislation that changes the name of 

the UFTA to the “Uniform Voidable Transactions Act” and makes various other amendments to 

the statutory framework. The amendments have not yet taken effect.

2

I GRANT Square One’s request for judicial notice, Dkt. No. 32, and DENY its request to strike

Houston’s declaration, Dkt. No. 31-1, to the extent the declaration relates to Houston’s 

jurisdictional arguments as opposed to the merits of the claims against her.

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BACKGROUND

On October 31, 2012, Square One filed an action against Lo in this district in connection 

with a loan that Square One had granted to AbsolutelyNew, Inc. (“ANI”) around the time that Lo 

was serving as ANI’s chief financial officer. Square 1 Bank v. Lo, No. 12-cv-05595-JSC (N.D. 

Cal. filed Oct. 31, 2012) (“Lo I”). The operative complaint brings a number of causes of action 

against ANI and Lo – including breach of contract, negligent misrepresentation, and conversion –

and seeks more than $4 million in damages. Id. at Dkt. No. 8. On December 16, 2013, the Hon. 

Jacqueline Corley issued a temporary protective order (“TPO”) prohibiting Lo from transferring, 

directly or indirectly, any interest in real property pending further order of the court. Id. at Dkt. 

Nos. 54, 57. The TPO remains in effect and the case remains pending before Magistrate Judge 

Corley. 

On August 19, 2014, Lo was indicted for wire fraud, mail fraud, fraudulent use of an 

unauthorized device, and criminal forfeiture for allegedly defrauding ANI of approximately 

$2,000,000 between January 2008 and February 2012. United States v. Lo, No. 14-cr-00442-

WHO (N.D. Cal. filed Aug. 19, 2014) (“Lo II”). Judgment was entered on April 15, 2015. Id. at 

Dkt. No. 64. Lo pled guilty to two counts of wire fraud and one count of mail fraud and was 

sentenced to 70 months in prison and $2,232,894.39 in restitution, $2,198,194.85 of which is to be 

paid to Square One.3 Id.

Square One filed the instant case on March 6, 2015. Dkt. No. 1 (“Compl.”). The 

complaint alleges that in or around June 2012, Houston and Lo acquired as community property 

the real property located at 55 San Fernando Way, San Francisco, California (the “Property”). 

Compl. ¶ 10. Houston and Lo subsequently resided together at the Property as husband and wife. 

Id. ¶ 11. On August 19, 2014, the same day Square One filed Lo II, Houston and/or Lo recorded 

with the San Francisco Recorder’s Office an interspousal transfer deed transferring the Property to 

Houston as her sole and separate property. Id. ¶ 12. Houston and/or Lo then listed the Property 

for sale and entered an agreement to sell it to a third party. Id. ¶ 13.

 

3 ANI requested that the restitution owed to it be paid directly to Square One. Lo II, No. 14-cr00442-WHO, Dkt. No. 29 at 1 n.1.

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Based on the execution and recording of the interspousal transfer deed, the complaint 

brings three fraudulent transfer causes of action against Houston and Lo: (1) fraudulent transfer in 

violation of California Civil Code § 3439.04(a)(1), for making a transfer with the intent to hinder, 

delay, or defraud a creditor; (2) fraudulent transfer in violation of California Civil Code § 

3439.04(a)(2), for making a transfer without receiving a reasonably equivalent value in exchange, 

and the debtor either was engaged in a transaction for which his remaining assets were 

unreasonably limited, or he intended to incur or reasonably should have believed that he would 

incur debts beyond his ability to repay; and (3) fraudulent transfer in violation of California Civil 

Code § 3439.05, for making a transfer without receiving a reasonably equivalent value in 

exchange, and the debtor either was insolvent at the time of the transfer or became insolvent as a 

result. 

On March 5, 2015, the day before Square One filed the instant case, the government 

moved in Lo II for an order restraining Lo and his family members from transferring or selling the 

Property and authorizing the government to record a notice of lis pendens against it. Lo II, No. 

14-cr-00442-WHO, Dkt. No. 28. The government stated that it sought the order so that the 

Property would be available for the payment of restitution under the Mandatory Victims

Restitution Act. Id. On the same date, Houston, Lo, and the government entered a stipulation 

agreeing that any proceeds from the sale of the Property would be deposited into the Court’s 

registry. Id. at Dkt. No. 31. I then issued an order directing that “[a]ll net proceeds” received by 

Lo or Houston from the sale of the Property be deposited into the Court’s registry “pending 

resolution of the parties’ rights to the net proceeds.” Id. at Dkt. No. 33. There have been no 

further submissions or orders regarding the proceeds from the sale of the Property.

On March 9, 2015, Square One filed in this action a notice of lis pendens against the 

Property. Dkt. No. 6. On April 3, 2015, Houston moved to release the lis pendens and to allow 

the net proceeds from the sale of the Property to be paid into the Court’s registry pursuant to the 

March 5, 2015 order in Lo II. Dkt. No. 11. On April 10, 2015, I granted the motion and ordered 

that the net proceeds from the sale of the Property be deposited into the Court’s registry and be 

governed by the March 5, 2015 order in Lo II.

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LEGAL STANDARD

A motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 

12(b)(6) tests the legal sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir.

2001). 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.” Cousins v. Lockyer, 568 F.3d 1063, 

1067–68 (9th Cir. 2009) (internal quotation marks and citations omitted). A claim is facially 

plausible when it “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) (internal quotation marks 

omitted). “[C]onclusory allegations of law and unwarranted inferences are insufficient to 

avoid . . . dismissal” under this standard. Cousins, 568 F.3d at 1067 (internal quotation marks 

omitted). “[I]t is within [the court’s] wheelhouse to reject, as implausible, allegations that are too 

speculative to warrant further factual development.” Dahlia v. Rodriguez, 735 F.3d 1060, 1076 

(9th Cir. 2013).

Houston also moves to dismiss under Federal Rule of Civil Procedure 12(b)(2) for lack of 

personal jurisdiction. Where a defendant seeks dismissal for lack of personal jurisdiction, the 

plaintiff has the burden to demonstrate that personal jurisdiction exists. In re W. States Wholesale 

Natural Gas Antitrust Litig., 715 F.3d 716, 741 (9th Cir. 2013). “However, the plaintiff must 

make only a prima facie showing of jurisdictional facts to withstand the motion to dismiss.” Id.

(internal quotation marks omitted). “[U]ncontroverted allegations in the complaint must be taken 

as true,” and “[c]onflicts between parties over statements contained in affidavits must be resolved 

in the plaintiff’s favor.” Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 

2004) (internal quotation marks omitted). But the court “may not assume the truth of allegations 

in a pleading which are contradicted by affidavit.” Data Disc, Inc. v. Sys. Tech. Associates, Inc., 

557 F.2d 1280, 1284 (9th Cir. 1977).

DISCUSSION

Houston moves to dismiss the claims against her on two grounds: first, because this Court 

lacks personal jurisdiction over her; and second, because the fraudulent transfer claims may be 

brought only against Lo, not against her. Neither argument has merit.

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I. PERSONAL JURISDICTION

In support of her Rule 12(b)(2) motion, Houston states that she was a resident of California 

at the time this case was filed but was residing in Oregon by the time Square One mailed her a 

summons and complaint on June 29, 2015.4 Mot. at 3 (Dkt. No. 31). She submits a declaration in 

which she states that she left California on June 13, 2015 and moved into her new residence in 

Oregon the following day. Houston Decl. ¶ 3 (Dkt. No. 31-1). She further states that she is no 

longer a resident of California, no longer has any interest in real property in California, and has 

“no further connection” to the state. Id. ¶ 21. 

Square One responds that this Court has both general and specific jurisdiction over 

Houston, and that in any event Houston consented to personal jurisdiction by moving for the 

release of the lis pendens. Opp. at 4-9 (Dkt. No. 32).

“Where, as here, there is no applicable federal statute governing personal jurisdiction, the 

law of the state in which the district court sits applies.” Harris Rutsky & Co. Ins. Servs. v. Bell & 

Clements Ltd., 328 F.3d 1122, 1129 (9th Cir. 2003). “California’s long-arm statute authorizes the 

court to exercise personal jurisdiction over a nonresident defendant on any basis not inconsistent 

with the California or federal Constitution.” Fireman’s Fund Ins. Co. v. Nat’l Bank of 

Cooperatives, 103 F.3d 888, 893 (9th Cir. 1996). Thus, because California’s long-arm statute “is 

coextensive with federal due process requirements, the jurisdictional analyses under state law and 

federal due process are the same.” Schwarzenegger, 374 F.3d at 800-01.

Due process requires that a nonresident defendant “have certain minimum contacts with 

[the forum state] such that the maintenance of the suit does not offend traditional notions of fair 

play and substantial justice.” Int’l Shoe Co. v. State of Wash., Office of Unemployment Comp. & 

Placement, 326 U.S. 310, 316 (1945) (internal quotation marks omitted). “[T]he nature and 

quality of contacts necessary . . . depends upon the type of jurisdiction asserted.” Fireman’s Fund, 

103 F.3d at 893. “General personal jurisdiction, which enables a court to hear cases unrelated to 

the defendant’s forum activities, exists if the defendant has ‘substantial’ or ‘continuous and 

 

4 Houston states that she received and signed for the summons and complaint on July 3, 2015. 

Houston Decl. ¶ 22. She does not challenge the sufficiency of service. See Mot. at 3-4.

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systematic’ contacts with the forum state.” Fields v. Sedgwick Associated Risks, Ltd., 796 F.2d 

299, 301 (9th Cir. 1986); see also Menken v. Emm, 503 F.3d 1050, 1056-57 (9th Cir. 2007)

(general jurisdiction requires a showing that the “defendant’s contacts with a forum are so

substantial, continuous, and systematic that the defendant can be deemed to be ‘present’ in that 

forum for all purposes”). “For an individual, the paradigm forum for the exercise of general 

jurisdiction is the individual’s domicile.” Daimler AG v. Bauman, 134 S. Ct. 746, 760 (2014)

(internal quotation marks omitted).

Specific personal jurisdiction allows a court to exercise jurisdiction over a defendant only 

where the defendant’s forum-related activities gave rise to the action before the court. To

determine whether specific jurisdiction exists, the Ninth Circuit applies a three-part test:

(1) the nonresident defendant must purposefully direct his activities 

or consummate some transaction with the forum or resident thereof; 

or perform some act by which he purposefully avails himself of the 

privileges of conducting activities in the forum, thereby invoking the 

benefits and protections of its laws; (2) the claim must be one which 

arises out of or relates to the defendant’s forum-related activities; 

and (3) the exercise of jurisdiction must comport with fair play and 

substantial justice, i.e. it must be reasonable.

Harris Rutsky, 328 F.3d at 1129; accord Menken, 503 F.3d at 1056-57.

Square One has made a sufficient showing of specific jurisdiction to defeat the motion to 

dismiss. Houston “consummate[d] some transaction” with California and “purposefully avail[ed] 

[her]self of the privileges of conducting activities in the forum,” Harris Rutsky, 328 F.3d at 1129, 

by, among other things, purchasing the Property and later executing the interspousal transfer deed 

concerning it. See Compl. ¶ 10; Houston Decl. ¶ 11 (“Lo and I . . . purchased the Property using 

proceeds from the sales of prior homes beginning in April 2003.”). This lawsuit plainly arises out 

of and relates to the purchase and the transfer of the Property, and Houston’s other activities in the 

state. See Fireman's Fund, 103 F.3d at 894 (“[A] lawsuit arises out of a defendant's contacts with 

the forum state if a direct nexus exists between those contacts and the cause of action.”).

Where a plaintiff satisfies these first two prongs, “the burden then shifts to the defendant to 

present a compelling case that the exercise of jurisdiction would not be reasonable.” Menken, 503 

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F.3d at 1057. In determining whether the defendant has presented a compelling case, the court 

balances the following factors, recognizing that none in itself is dispositive:

(1) the extent of the defendant’s purposeful interjection into the 

forum state’s affairs; (2) the burden on the defendant of defending in 

the forum; (3) the extent of conflict with the sovereignty of the 

defendants’ state; (4) the forum state’s interest in adjudicating the 

dispute; (5) the most efficient judicial resolution of the controversy;

(6) the importance of the forum to the plaintiff’s interest in 

convenient and effective relief; and (7) the existence of an 

alternative forum.

Terracom v. Valley Nat. Bank, 49 F.3d 555, 561 (9th Cir. 1995) (internal quotation marks and 

alterations omitted); accord W. States Wholesale, 715 F.3d at 745.

Application of these factors does not present a compelling case for Houston. Far from it. 

The complaint and her declaration indicate that she resided in California up to and through the 

date this action was filed and participated in the purchase and sale of multiple pieces of real 

property in the state. 5 See Compl. ¶¶ 4, 12; Houston Decl. ¶¶ 11, 20. This is a significant 

“purposeful interjection into the forum state’s affairs.” Terracom, 49 F.3d at 561. Houston offers 

no basis for concluding that exercising jurisdiction over her creates any conflict with the 

sovereignty of Oregon, or that California lacks a significant interest in being the forum for a 

dispute over property located and conduct that occurred within the state. See Reply at 6-7 (Dkt. 

No. 33). Nor does she dispute that convenience and efficiency concerns favor hearing this case in 

 

5

Indeed, both the complaint and Houston’s declaration strongly indicate that she was domiciled in 

California up to and through the date this action was filed. The complaint alleges that Houston “is 

now, and at all material times hereto has been, a citizen of the State of California, with her 

residence and domicile in the County of San Francisco,” and that “at all times since June 2012,” 

Houston and Lo resided at the Property. Compl. ¶¶ 4, 12. In line with these allegations, Houston 

states in her declaration that the Property was her residence, and that “[a]t the time the action was 

filed, [she] was a resident of the State of California and County of San Francisco.” Houston Decl. 

¶¶ 11, 20. Nothing in Houston’s declaration indicates that at any time before June 13, 2015, she 

did not both reside and intend to remain in California.

Square One contends that this means that this Court has general as well as specific jurisdiction 

over Houston for the purposes of this action. See Mot. at 5-6; see also Bauman v. 

DaimlerChrysler Corp., 644 F.3d 909, 913 n.7 (9th Cir. 2011) (noting that “general jurisdiction is 

determined at the time the suit was filed”) rev’d on other grounds sub nom. Daimler AG v. 

Bauman, 134 S. Ct. 746 (2014). Because I find that specific jurisdiction exists, I do not address 

whether the Court also has general jurisdiction over Houston, or whether she consented to 

personal jurisdiction by moving for the release of the lis pendens.

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this district, where the rest of the civil and criminal claims against Lo have been or are being heard

and where this Court is quite familiar with many of the underlying facts. See id.

Houston argues instead that exercising jurisdiction over her is unreasonable because Lo, 

not her, is the real wrongdoer in this case. She contends that Square One “cannot seek additional 

compensation from [her] when the [government] has determined . . . that Lo is the sole party at 

fault for the fraudulent acts against plaintiff.” Id. It is true that Houston has not been squarely 

accused of any wrongdoing in any of the web of cases in this district involving Lo. As discussed 

below, however, this does not preclude Square One from naming her as a defendant in this action. 

Nor does it provide a basis for finding the exercise of personal jurisdiction over her 

unconstitutional. 

While it may be that having to litigate in this district is a burden for Houston, and that there 

are other forums where this action could be brought, these factors are far outweighed by the others

discussed above. Square One has made a prima facie showing of personal jurisdiction.

II. FRAUDULENT TRANSFER CLAIMS 

Houston contends that Square One cannot maintain the fraudulent transfer claims against 

her because she is not a “debtor” to Square One. The claims are brought under California Civil 

Code §§ 3439.04(a)(1)-(2), and 3439.05, which provide as follows:

(a) A transfer made or obligation incurred by a debtor is fraudulent 

as to a creditor, whether the creditor’s claim arose before or after 

the transfer was made or the obligation was incurred, if the debtor 

made the transfer or incurred the obligation as follows:

(1) With actual intent to hinder, delay, or defraud any creditor of 

the debtor.

(2) Without receiving a reasonably equivalent value in exchange 

for the transfer or obligation, and the debtor either:

(A) Was engaged or was about to engage in a business or a 

transaction for which the remaining assets of the debtor were 

unreasonably small in relation to the business or transaction.

(B) Intended to incur, or believed or reasonably should have 

believed that he or she would incur, debts beyond his or her ability 

to pay as they became due.

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Cal. Civ. Code §§ 3439.04(a)(1)-(2).

A transfer made or obligation incurred by a debtor is fraudulent as 

to a creditor whose claim arose before the transfer was made or the 

obligation was incurred if the debtor made the transfer or incurred 

the obligation without receiving a reasonably equivalent value in 

exchange for the transfer or obligation and the debtor was 

insolvent at that time or the debtor became insolvent as a result of 

the transfer or obligation.

Cal. Civ. Code § 3439.05.

Houston argues that because each statute applies only where the transfer or obligation was

made by a “debtor,” and only Lo was a debtor to Square One, this action can be maintained only 

against him, not against her.

This argument is not convincing. The UFTA allows a defrauded creditor “to reach 

property in the hands of a transferee.” Mejia v. Reed, 31 Cal.4th 657, 663 (2003). California Civil 

Code § 3439.07, the UFTA’s remedies provision, enables a prevailing creditor to obtain, among 

other remedies, “[a]voidance of the transfer or obligation to the extent necessary to satisfy the 

creditor’s claim,” “[a]n injunction against further disposition by the debtor or a transferee, or both, 

of the asset transferred or its proceeds,” and “[a]ny other relief the circumstances may require.” 

Cal. Civ. Code § 3439.07. Where a creditor seeks avoidance of the transfer, and the transfer is 

found to be voidable, “judgement may be entered against . . . [t]he first transferee of the asset,”

and “the creditor may recover judgment for the value of the asset transferred, . . . or the amount 

necessary to satisfy the creditor’s claim, whichever is less.” Cal. Civ. Code § 3439.08.

California Civil Code § 3439.08, the UFTA’s “protection of transferee” provision, establishes that 

“[a] transfer or an obligation is not voidable under [section 3439.04(a)(1)] against a person who 

took in good faith and for a reasonably equivalent value or against any subsequent transferee or 

obligee.” Cal. Civ. Code § 3439.08. Section 3439.08 further ensures that “notwithstanding the 

voidability of a transfer or an obligation . . . , a good faith transferee or obligee is entitled, to the 

extent of the value given the debtor for the transfer or obligation, to . . . [a] reduction in the 

amount of the liability on the judgment.” Cal. Civ. Code § 3439.08.

These provisions plainly contemplate that fraudulent transfer claims may be brought, and 

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judgments obtained, against transferees as well as debtors. Indeed, creditors routinely bring 

UFTA fraudulent transfer actions against transferees. See, e.g., Mejia v. Reed, 31 Cal.4th 657, 661 

n.1 (2003) (mother of husband’s child sued husband, who owed her child support, and husband’s 

former wife, who had obtained husband’s interest in real property through marital settlement 

agreement); In re AFI Holding, Inc., 525 F.3d 700, 702 (9th Cir. 2008) (bankruptcy trustee of 

entity operated as illegal Ponzi scheme sued various entity investors to recover payouts made with 

funds raised from other investors); Renda v. Nevarez, 223 Cal. App. 4th 1231, 1234 (2014)

(judgment creditor sued judgment debtor and various sham entities to which judgment debtor had 

transferred assets); State Bd. of Equalization v. Woo, 82 Cal. App. 4th 481, 482-83 (2000) 

(government sought earnings withholding against wife to recover husband’s tax debt after husband 

and wife entered marital agreement transmuting their future earnings to separate property).

This is true even where, as Houston contends is the case here, the transferee lacks 

knowledge of the fraudulent nature of the transfer. See, e.g., AFI, 525 F.3d at 702, 707-08. Of 

course, under section 3439.08, a “good faith transferee” is entitled to “[a] reduction in the amount 

of the liability on the judgment,” and one who “took . . . for a reasonably equivalent value” cannot 

have the transfer voided against her. Cal. Civ. Code § 3439.08. But these good faith transferee 

provisions do not automatically preclude a creditor from bringing a fraudulent transfer claim 

against a transferee in the first instance, and in the circumstances of this case, they are not 

amenable to resolution on a motion to dismiss.

Houston cites no authority to the contrary. As the moving party, it is her burden to show 

that Square One cannot maintain its claims against her. She has not done so.

CONCLUSION

The motion to dismiss is DENIED. Houston shall answer the complaint within fourteen 

days of this Order. 

IT IS SO ORDERED.

Dated: September 3, 2015

______________________________________

WILLIAM H. ORRICK

United States District Judge

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