Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_15-cv-02909/USCOURTS-casd-3_15-cv-02909-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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8 UNITED STATES DISTRICT COURT

9 SOUTHERN DISTRICT OF CALIFORNIA

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11 JAMES A. ZACHMAN, Case No.: 3:15-cv-02909-BEN-JMA

12 Plaintiff,

ORDER:

13 v.

(1) GRANTING DEFENDANTS’

MOTION TO DISMISS; 14 WELLS FARGO N.A.,

15 Defendant.

(2) DENYING PLAINTIFF’S

MOTION TO AMEND; 16

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(3) DENYING PLAINTIFF’S

MOTION FOR APPROVAL OF

SUPPLEMENTAL PLEADINGS

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20 [DOCKET NOS. 23,26, 38]

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Pending before the Court are: 1) Defendant’s Motion to Dismiss Plaintiffs First

Amended Complaint (Docket No. 23), 2) Plaintiffs Motion to Amend Complaint

(Docket No. 26); and 3) Plaintiffs Motion for Approval of Supplemental Pleading

(Docket No. 38). Each motion has been fully briefed. The Court finds the Motions

suitable for determination on the papers without oral argument, pursuant to Civil Local

Rule 7.1.d.l. For the reasons set for below, Defendant’s motion is GRANTED with

leave to amend, and Plaintiffs’ motions are DENIED as moot.

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Case 3:15-cv-02909-BEN-JMA Document 43 Filed 12/07/16 PageID.<pageID> Page 1 of 6
BACKGROUND1

PlaintiffJames A. Zachman, proceedingpro se, filed his initial Complaint against

Defendant Wells Fargo Bank N.A. (“Wells Fargo”) on December 28, 2015. (Docket No.

1.) The Complaint alleged California state law claims for negligence, breach of contract,

and “aiding and abetting a breach offiduciary duty.” (Id.)

Plaintifffiled his First Amended Complaint (“FAC”) on May 16,2016. (Docket

No. 20.) The operative facts ofthe FAC are similar to the initial Complaint. Plaintiffrealleges his previous California state law claims for negligence and “aiding and abetting a

breach offiduciary duty.” (Id.) The FAC alleges three new state law claims for violation

ofCalifornia’s Unfair Competition Act, aiding and abetting fraud, and aiding and

abetting conversion, and one federal claim for violation ofthe Racketeer Influenced

Corrupt Organizations Act. (Id.) Plaintiffs claims arise out of an alleged unlawful

creation of a Wells Fargo limited liability company bank account and subsequent

unlawful transfers offunds to a third-party account by a third-party individual. (Id.)

Real Time Data Services LLC ("Data Services") is organized under the laws of

Delaware. (Compl. f 15.) Since March 27, 2008, Data Services is comprised, in relevant

part, oftwo members, two Co-Presidents, and one manager. (Compl. Ex. A.) Plaintiffis

Co-President, member and sole manager ofData Services. (Id.) CBS Accounting

Services, in New Delhi, Inda, is the remaining member, and is represented by Ms.

Sangeeta Chhabra. (Id.) Ms. Chhabra is also Co-President. (Id.) Plaintiff and CBS

Accounting each own a fifty percent interest in Data Services. (Id.)

As the sole manager, Plaintiffwas in charge of all ofData Services' U.S. banking

and financial activities. (Compl. 17.) In January 2009, Plaintiff created a bank account

for Data Services at Wells Fargo (the "9809 account"). (Compl. 118.) In May 2012, a

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27 i Unless otherwise noted, the Court is not making any factual findings, but rather summarizing the

relevant allegations ofPlaintiffs First Amended Complaint for purposes of evaluating Defendant's

Motion to Dismiss. 28

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dispute arose between Plaintiff and Ms. Chhabra, resulting in Ms. Chhabra "locking] the

Plaintiff out ofthe operations ofData Services by commandeering the computer servers."

(Compl. f 19.) Plaintiffthen shut Ms. Chhabra out ofthe 9809 account until the dispute

could be resolved. (Compl. f 14.) On June 18, 2012, Ms. Chhabra created a Wells Fargo

account (the "9039 account") for a company called "My Real Data Services LLC" at the

Fairfax branch in Lewes, Delaware. (Compl. $ 22.) Ms. Chhabra created the account

using Indian passports, a Delaware registering agent’s address, and Data Services'

Employer Identification Number, Delaware business file number, and Entity Member

document. (Compl. 22-23.)

According to Plaintiff, Wells Fargo contacted the State ofDelaware to verify the

file number and found no record ofthe company My Real Data Services, yet created the

account anyway. (Compl. 25-26.) Then, sometime between June 18 and July 1, 2012,

the company name on the 9039 account changed from "My Real Data Services LLC" to

"Real Time Data Services LLC". (Compl. 27.) Over the next few months, Ms.

Chhabra used the Wells Fargo 9039 account to transfer over $350,000 to an account in

India. (Compl. 32-34.) The 9039 account allowed Ms. Chhabra to “carry out her

scheme to unlawfully cut [Plaintiff] out the LLC’s management and ownership [sic].”

(Compl. 34.) Ms. Chhabra’s plans included taking control ofData Services’ finances by

“moving the LLC’s bank account to her own Data Services Wells Fargo account.” (Id.)

Wells Fargo has an obligation to comply with the obligations set forth in the

Banking Secrecy Act (“BSA”) and the Patriot Act. (Compl. 37.) Plaintiff alleges Wells

Fargo knew Ms. Chhabra provided a false business name, “chose to ignore the false

information,” and provided Ms. Chhabra with banking services. (Compl. 43, 48.)

PROCEDURAL HISTORY

Plaintifffiled his initial Complaint on December 28, 2015. (Docket No. 1.) On

February 9, 2016, Defendant filed a Motion to Dismiss the Complaint for lack of

jurisdiction and for failure to state a claim pursuant to Federal Rule ofCivil Procedure

12(b)(1) and (b)(6). (Docket No. 8.) On April 20, 2016, after taking the matter on

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submission, the Court granted Defendant’s Motion to Dismiss on the grounds that the

allegations in Plaintiffs Complaint failed to establish subject matterjurisdiction or

standing to bring the claims for relief. Plaintiffwas granted leave to file an amended

complaint by May 23, 2016. (Docket No. 19.) Plaintifffiled his First Amended

Complaint (“FAC”) on May 16, 2016. (Docket No. 20.)

On June 6, 2016, Defendant filed a Motion to Dismiss the FAC. (Docket No. 23.)

On July 12, 2016, Plaintifffiled a Motion to Amend Complaint. (Docket No. 26.) On

July 21, 2016, the Court took Defendant’s Motion to Dismiss the FAC under submission.

(Docket No. 31.) On September 2, 2016, the Court took Plaintiffs Motion to Amend

under submission. (Docket No. 33.) On October 6, 2016, Plaintifffiled a Motion for

Approval of Supplemental Pleading, which the Court also took under submission.

(Docket Nos. 38, 41.)

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13 LEGAL STANDARD

A challenge to the existence ofsubject-matterjurisdiction under Federal Rule of

Civil Procedure 12(b)(1) may be either facial or factual in nature. Wolfe v. Strankman,

392 F.3d 358, 362 (9th Cir. 2004). A facial 12(b)(1) motion involves a limited inquiry

into the allegations ofthe complaint. Id. In doing so, courts must assume all material

allegations in the complaint to be true and determine whether a lack offederal

jurisdiction appears from the complaint itself. Thornhill Publ 'g Co. v. Gen. Tel. Elec.,

2 594 F.2d 730, 733 (9th Cir. 1979).

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21 DISCUSSION

Wells Fargo moves to dismiss the FAC for failure to cure the deficiencies in the

Complaint regarding the lack ofsubject-matterjurisdiction and standing under Rule

12(b)(1). Wells Fargo further argues that Plaintiffs federal claim and five state law

claims should be dismissed for failure to state a claim pursuant to Rule 12(b)(6). The

Court need not perform the Rule 12(b)(1) analysis ofDefendant’s subject-matter

jurisdiction challenge or Rule 12(b)(6) analysis ofPlaintiffs claims because Plaintiff

failed to establish standing in the FAC.

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As discussed in the Court’s April 20, 2016 Order (Docket No. 19), a plaintiff

bringing an action in the federal court has the burden to show that Article III standing

exists. Lujan v. Defenders ofWildlife, 504 U.S. 555, 561 (1992); Snake River Farmers ’

Ass’n, Inc. v. Dep’t of Lab., 9 F.3d 792, 795 (9th Cir. 1993). Specifically, the plaintiff

must show (1) an injury in fact; (2) traceable to the challenged action ofthe defendant;

and (3) likely to be redressed by a favorable decision. Lujan, 504 U.S. at 560.

In California, a limited liability company is governed by the “law ofthe state or

otherjurisdiction under which [it] is formed.” Cal. Corp. Code § 17708.01. Data

Services was organized under Delaware law. Accordingly, the Court looks to Delaware

law to determine whether Plaintiffhas any individual right to Data Services’ assets.

Delaware courts have held that case law governing corporate derivative suits is

applicable to derivative suits brought on behalf of an LLC. See Kelly v. Blum, No. 4516-

VCP, 2010 WL 629850, at *9 (Del. Ch. Feb. 24, 2010); VGS, Inc. v. Castiel, No. 17995,

2003 WL 723285, at *11 (Del. Ch. Feb. 28, 2003); Gotham Partners, L.P. v. Hailwood

Realty Partners, L.P., No. 15754, 1998 WL 832631, at *5 (Del. Ch. Nov. 10, 1998). In

determining whether a claim is derivative or direct, “[a] court should look to the nature of

the wrong and to whom the reliefshould go.” Tooley v. Donaldson, Lufkin & Jenrette,

845 A.2d 1031,1039 (Del. 2004). A direct lawsuit is proper where the plaintiffis

directly injured by the defendant’s conduct. See VGS, Inc., 2003 WL 723285, at *11. In

other words, a suit to recover damages to an LLC must be brought in that LLC’s name.

28 U.S.C. § 1654 sets forth the general rule “establishing the right of an individual

to represent oneselfm all federal courts ofthe United States.” Simon v. Hartford Life,

Inc., 546 F.3d 661, 664 (9th Cir. 2008) (emphasis added). “Section 1654 is intended to

provide individuals with equal access to the courts by permitting individuals to represent

themselves.” Id. (emphasis added). Additionally, “it is well established that the privilege

to represent oneselfpro se provided by § 1654 is personal to the litigant and does not

extend to other parties or entities.” Id., citing McShane v. United States, 366 F.2d 286,

288 (9th Cir. 1966) (citation omitted) (emphasis added).

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Here, Plaintiffs FAC suffers from the same pleading deficiencies regarding

standing as in his initial Complaint. Plaintiffbrought this action in his individual

capacity, claiming that money, ofwhich he had a fifty percent interest as a member of

Data Services, was unlawfully or fraudulently transferred out of a Data Services’ bank

account (which was serviced by Wells Fargo), to another bank account in India, which he

cannot access. (Compl. ffl[32-34, 45.) Taking the relevant allegations ofPlaintiffs FAC

as true, Plaintiffhas not established that he has suffered harm in his individual capacity.

As alleged, Plaintiffs FAC suggests that Data Services, a non-individual entity, was

directly harmed. As such, Plaintiff has not shown he has suffered an injury in fact in his

individual capacity and therefore lacks standing.

The Court therefore GRANTS Defendant’s motion for lack ofstanding.

CONCLUSION

The Court GRANTS Defendant’s Motion to Dismiss. The Complaint is

DISMISSED with leave to amend. As a result, Plaintiffs Motion to Amend and

Motion for Approval or Supplemental Pleadings are DENIED as moot. Plaintiffmay

file a Second Amended Complaint on or before December 28.2016. IfPlaintiff does not

file an amended complaint, the Clerk shall close this case without further order ofthe

Court.

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19 IT IS SO ORDERED.

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21 DATED: December^/, 2016

H(^J©GERT. BENITEZ

United States District Judge 22

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