Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_14-cv-02682/USCOURTS-azd-2_14-cv-02682-0/pdf.json

Nature of Suit Code: 140
Nature of Suit: Negotiable Instruments
Cause of Action: 28:1332 Diversity-Breach of Contract

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

First Power Corporation, 

Plaintiff, 

v. 

S & C Electric Company, 

Defendant.

No. CV-14-02682-PHX-DGC

ORDER 

 Defendant S&C Electric Company (“S&C”) has filed a motion for leave to amend 

its counterclaim. Doc. 32. Plaintiff First Power Corporation (“First Power”) has filed a 

motion for leave to file a supplemental response to Defendant’s motion. Doc. 46. The 

motions are fully briefed. The Court will grant Defendant’s motion and deny Plaintiff’s 

motion. 

I. Legal Standard. 

 Rule 15 makes clear that the Court “should freely give leave [to amend] when 

justice so requires.” Fed. R. Civ. P. 15(a)(2). The policy in favor of leave to amend must 

not only be heeded, see Foman v. Davis, 371 U.S. 178, 182 (1962), it must be applied 

with “extreme liberality,” see Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 

880 (9th Cir. 2001). This liberality “is not dependent on whether the amendment will add 

causes of action or parties.” DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 186 (9th 

Cir. 1987). The Court may deny a motion to amend if there is a showing of undue delay 

or bad faith on the part of the moving party, undue prejudice to the opposing party, or 

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futility of the proposed amendment. See Foman, 371 U.S. at 182. Generally, however, 

“this determination should be performed with all inferences in favor of granting the 

motion.” Griggs v. Pace Am. Group, Inc., 170 F.3d 877, 880 (9th Cir. 1999). 

II. Analysis. 

 S&C moves to amend its Answer to include additional counterclaims for fraud and 

trademark infringement. Doc. 33-1, ¶¶ 36-61. First Power opposes addition of the fraud 

claim. Doc. 40 at 2. It argues that the claim is futile and that S&C failed to plead it with 

particularity under Rule 9(b). In its fraud claim, S&C alleges the following: 

37. First power represented to S&C that it would jointly develop and 

participate in mutually beneficial opportunities, transactions, and 

arrangements as set forth in Paragraph 2 of the Agreement. 

38. At the time that First Power made the representation, that 

representation was material and false and First Power knew it was 

false at the time it was made. 

39. Indeed, First Power never intended to abide by its commitment. 

First Power made the representation with the intent and expectation 

that S&C would rely and act on it in a manner reasonably 

contemplated. 

40. S&C had a right to rely on First Power’s representation. 

41. S&C in fact relied on First Power’s representation when deciding to 

enter into the Agreement. 

42. As a result of First Power’s intentional misrepresentation, S&C has 

been damaged and is entitled to compensation for those damages. 

Doc. 33-1, ¶¶ 37-42. 

A. Motion to Amend.

 First Power argues the fraud claim is futile because S&C has admitted that First 

Power performed at least some of its contractual obligations, and therefore S&C cannot 

show that First Power intended to deceive it at the time of the representation. It also 

argues S&C failed to plead the claim with particularity under Rule 9(b). 

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 In analyzing futility, courts generally look to whether the amendment would be 

sufficient to withstand a Rule 12(b)(6) motion to dismiss. See Townsend v. University of 

Alaska, 543 F.3d 478, 486 n.6 (9th Cir. 2008) (noting that the “basis for futility is more 

accurately characterized as a failure to state a claim for relief”). In order to prevail on a 

fraud claim under Arizona law, a claimant must show: 

1) a representation; 2) its falsity; 3) its materiality; 4) the speaker’s 

knowledge of the representation’s falsity or ignorance of its truth; 5) the 

speaker’s intent that it be acted upon by the recipient in the manner 

reasonably contemplated; 6) the hearer’s ignorance of its falsity; 7) the 

hearer’s reliance on its truth; 8) the right to rely on it; and 9) his consequent 

and proximate injury. 

Echols v. Beauty Built Homes, 647 P.2d 629, 631 (Ariz. 1982); see Haisch v. Allstate 

Ins. Co., 5 P.3d 940, 944 (Ariz. Ct. App. 2000) (citing Echols). A plaintiff “must state 

the time, place, and specific content of the false representations as well as the identities of 

the parties to the misrepresentation.” Schreiber Distrib. Co. v. Serv-Well Furniture Co., 

806 F.2d 1393, 1401 (9th Cir. 1986); see also Vess v. Ciba-Geigy Corp. USA, 317 F.3d 

1097, 1106 (9th Cir. 2003) (“Averments of fraud must be accompanied by the who, what, 

when, where, and how of the misconduct charged.”); Lancaster Cmty. Hosp. v. Antelope 

Valley Dist., 940 F.2d 397, 405 (9th Cir. 1991) (Rule 9(b) “requires a pleader of fraud to 

detail with particularity the time, place, and manner of each act of fraud, plus the role of 

each defendant in each scheme.”). 

 S&C alleges promissory fraud – fraud in which the misrepresentation alleged is 

“the making of a promise without intent to perform.” Trollope v. Koerner, 470 P.2d 91, 

100 (Ariz. 1970). “Unless the plaintiff can prove that the defendant intended to deceive 

the plaintiff at the time the representation was made, the claim cannot stand.” McAlister 

v. Citibank, 829 P.2d 1253, 1260 (Ariz. Ct. App. 1992). 

 The Court finds S&C sufficiently alleged the elements of a claim for promissory 

fraud under Arizona law and Rule 9(b). The amended complaint alleges that on 

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August 12, 2013, First Power made a representation through its Managing Director, 

Michael Horner, that it would “jointly develop and participate in certain mutually 

beneficial opportunities,” but that it never actually intended to perform this obligation. 

Doc. 33-1, ¶¶ 5, 6, 37. S&C alleges that First Power knew the representation was false 

and that S&C would rely on it. The allegations provide the who, what, when, and how 

regarding the alleged fraud, which the Court finds “specific enough to give [First Power] 

notice of the particular misconduct which is alleged to constitute the fraud[.]” Bly-Magee 

v. California, 236 F.3d 1014, 1019 (9th Cir. 2001). In addition, the fact that S&C has 

admitted that First Power brought some mutually beneficial opportunities to S&C does 

not necessarily render the claim futile. This is a factual issue to be addressed at summary 

judgment or trial. For purposes of a Rule 12(b)(6) motion, which is the effective standard 

for judging futility of a proposed amendment, Townsend, 543 F.3d at 486 n.6, the Court 

must assume the allegations of S&C’s counterclaim are true. S&C’s motion to amend 

will be granted.

B. Motion for Leave to File Supplemental Response. 

 First Power has filed a motion for leave to submit a supplemental response, 

arguing that S&C improperly raised a new argument in its reply. The Court, however, 

did not rely on S&C’s reply brief in the above analysis. The motion therefore will be 

denied as moot. 

IT IS ORDERED:

1. Defendant’s motion for leave to amend (Doc. 32) is granted. Defendant 

shall file its amended document with the clerk of court on or before 

May 20, 2015. 

2. Plaintiff’s motion for leave to file a supplemental response (Doc. 46) is 

denied. 

 Dated this 15th day of May, 2015. 

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