Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_23-cv-00411/USCOURTS-azd-2_23-cv-00411-0/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 28:1446 Petition for Removal

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Karla Kretsch, et al.,

Plaintiffs,

v. 

John Barton, et al.,

Defendants.

No. CV-23-00411-PHX-ROS

ORDER 

Plaintiff Karla Kretsch alleges Defendant John Barton,1among other offenses, 

defrauded her into making several investments between 2010 and 2012. (Doc. 11, “SAC”). 

Defendants seek dismissal of the Second Amended Complaint (Doc. 12, “Mot.”). As each 

count of the Complaint is deficient to state a claim, the Court will grant Defendant’s Motion 

and dismiss the complaint without prejudice and with leave to amend.

BACKGROUND

Plaintiff alleges the following facts in the Complaint. Between 2010 and 2012, 

Plaintiff Karla Kretsch made several investments with Guy Newman, a representative of 

investment banking firm GVC Capital and alleged agent of Defendant John Barton. 

SAC ¶¶ 14–15, 20–22, 27. In 2010, Plaintiff invested $100,000 in Creative Learning 

Corporation for what she was told would be a 20% stake in the company, but Plaintiff’s 

1 Though Plaintiff’s Complaint identifies multiple defendants and Defendants bring their

Motion on behalf of both John and Susan Barton, Plaintiff references only Defendant John 

Barton’s conduct in the Complaint. For the purposes of this Motion, the Court will use 

“Defendant” to refer to Defendant John Barton. 

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shares “never constituted a 20% owner stake.” Id. at ¶¶ 23–34. Plaintiff then invested 

$75,000 in Vanguard Energy Corporation in 2011 after Newman gave her 10,000 shares in 

an unrelated transaction. Id. at ¶¶ 35–40. Later in 2011, Plaintiff invested $30,000 in 

Spectrum Resources Corporation, for which Defendant was President and Director, 

through Newman’s solicitation. Id. at ¶¶ 41–53. Spectrum “thereafter went out of 

business” rendering Plaintiff’s investment “worthless.” Id. at ¶ 54. In 2012, Newman 

solicited Plaintiff to invest in Rockdale Resources Corporation, for which Defendant was 

a director and officer, characterizing the investment as “low risk.” Id. at ¶¶ 55–66. Plaintiff 

invested $61,000 in Rockdale and another $50,000 in Spectrum. Id. at ¶ 67. In January 

2014, Newman contacted Plaintiff to “take a look” at investing in General Cannabis 

Corporation, telling Plaintiff “maybe we will get out of this unscathed after all” while 

“concealing” his “history of failure and non-disclosure.” Id. at ¶¶ 74–76. 

Throughout the years, Defendant and Newman told Plaintiff she was “covered,” 

“would be taken care of,” and Defendant “would help her recover her losses.” Id. at 

¶¶ 113–15. Defendant, Newman, and Plaintiff engaged in settlement discussions which 

purportedly resulted in an agreement for Defendant and Newman to pay Plaintiff $500,000 

in stock “to make her whole.” Id. at ¶ 123. Defendant did not pay Plaintiff pursuant to the 

alleged agreement. On April 1, 2019, Defendant and Plaintiff executed a tolling agreement 

for “certain claims against [Defendant] arising out of the offer and sale of securities.” Id.

at ¶¶ 107–08.2

In 2020, Plaintiff initiated a Financial Industry Regulatory Authority (“FINRA”) 

arbitration against Newman and GVC Capital, alleging Newman committed securities 

fraud, negligence, breach of fiduciary duty, constructive fraud, and negligent 

misrepresentation. Id. at ¶ 80. Plaintiff “prevailed on her claims against Newman and was 

2 Though not mentioned in the Complaint, the agreement expressly provides it does “not 

revive any Claim that [Plaintiff] had against [Defendant and Newman] that lapsed or was 

barred by any statute of limitation . . . before the Effective Date” of April 1, 2019. 

(Doc. 12-1 at 9–10). The Complaint incorporates the agreement and Plaintiff did not object 

to the authenticity of the copy of the agreement attached as Exhibit B to Defendant’s 

Motion, so the Court may consider the document in deciding this motion. See Rand v. 

Midland Nat’l Life Ins., 857 Fed. App’x 343, 346 (9th Cir. 2021).

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awarded damages.” Id. at ¶ 82. During the arbitration, Plaintiff alleges she “first learned 

of the magnitude of Defendant Barton’s fraud.” Id. at ¶ 86. 

MOTION TO DISMISS

A complaint must contain a “short and plain statement of the claim showing that the 

pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). “To survive a motion to dismiss, a 

complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief 

that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. 

Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted)). If “the wellpleaded facts do not permit the court to infer more than the mere possibility of misconduct, 

the complaint” has not adequately shown the pleader is entitled to relief. Id. at 679. 

Although federal courts ruling on a motion to dismiss “must take all of the factual 

allegations in the complaint as true,” they “are not bound to accept as true a legal 

conclusion couched as a factual allegation.” Id. at 678 (quoting Twombly, 550 U.S. at 555) 

(internal quotations omitted). 

Plaintiff’s Complaint alleges ten causes of action against Defendants: (1) Arizona 

securities fraud; (2) negligent misrepresentation; (3) control person liability; 

(4) constructive fraud; (5) civil conspiracy; (6) fraud; (7) aiding and abetting tortious 

conduct; (8) negligent infliction of emotional distress; (9) intentional infliction of 

emotional distress; and (10) breach of contract.

A. Statute of Limitations and Tolling

Defendants’ Motion first argues the applicable statutes of limitations bar Plaintiff’s 

claims. See Mot. at 2–6. Plaintiff’s claims have statutes of limitations ranging between 

two and three years.3 Aside from her breach of contract claim, all of Plaintiff’s claims arise 

3 Two-year statutes of limitation: Arizona Securities Act claims (A.R.S. §§ 44-2004); 

negligent misrepresentation (Cavan v. Maron, 182 F. Supp. 3d 954, 962 (D. Ariz. 2016)); 

breach of fiduciary duty (Kisner v. Broome, 2017 WL 6462245, *5 (Ariz. Ct. App. Dec. 

19, 2017)); negligent infliction of emotional distress and intentional infliction of emotional 

distress (Barba v. Seung Heun Lee, 2010 WL 11515658, at *20–21 (D. Ariz. Aug. 25, 

2010)).

Three-year statutes of limitation: fraud (Cavan v. Maron, 182 F. Supp. 3d 954, 962 (D. 

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from investments she made between 2010 and 2012. For these claims to be viable, they 

must have been viable when the parties executed the tolling agreement on April 1, 2019. 

If any of her claims expired before then, the statutes of limitations bar them. 

Federal courts sitting in diversity apply state substantive law and federal procedural 

law. Freund v. Nycomed Amersham, 347 F.3d 752, 761 (9th Cir. 2003) (quoting Gasperini 

v. Center for Humanities, Inc., 518 U.S. 415, 427 (1996)). Statutes of limitations are 

substantive law, Albano v. Shea Homes Ltd. P’ship, 634 F.3d 524, 530 (9th Cir. 2011), so 

Arizona law governs. Arizona follows the discovery rule, under which “a cause of action 

does not accrue until the plaintiff knows or with reasonable diligence should know the facts 

underlying the cause.” Doe v. Roe, 955 P.2d 951, 960 (Ariz. 1998) (citing Gust, Rosenfeld 

& Henderson v. Prudential Ins. Co., 898 P.2d 964, 968 (Ariz. 1995)). The discovery rule 

applies to all of Plaintiff’s claims here. See Gust, 898 P.2d at 966–69 (contract and tort 

claims); A.R.S. § 44-2004(B) (statutory analog to discovery rule for Arizona securities 

fraud claims). 

The discovery rule “does not permit a party to hide behind its ignorance when 

reasonable investigation would have alerted it to the claim.” ELM Ret. Ctr., LP v. 

Callaway, 246 P.3d 938, 941 (Ariz. Ct. App. 2010). Plaintiffs are “charged with a duty to 

investigate with due diligence to discover the necessary facts.” Doe v. Roe, 955 P.2d 951, 

962 (Ariz. 1998). The “core question” in applying the discovery rule is “whether a 

reasonable person would have been on notice to investigate.” Walk v. Ring, 44 P.3d 990, 

992 (Ariz. 2002). To benefit from the discovery rule, a complaint must “demonstrate (1) 

the time and manner of discovery, and (2) the inability to have made earlier discovery 

despite reasonable diligence.” Cavan v. Maron, 182 F. Supp. 3d 954, 963 (D. Ariz. 2016) 

(emphasis in original). 

Plaintiff argues she does not bear the burden of proving the discovery rule applies, 

citing the Third Circuit’s statement that a court “may not allocate the burden of invoking 

the discovery rule in a way that is inconsistent with the rule that a plaintiff is not required 

Ariz. 2016)); constructive fraud (Rindlisbacher v. Steinway & Sons Inc., 497 F.Supp.3d 

479, 492 (D. Ariz. 2020)).

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to plead, in a complaint, facts sufficient to overcome an affirmative defense.” Schmidt v. 

Skolas, 770 F.3d 241, 251 (3rd Cir. 2014). But, as Defendants point out, this opinion is 

not binding on the Court. (Doc. 14, “Reply” at 1–2). Arizona case law clearly places the 

burden of establishing the discovery rule on the plaintiff on a motion to dismiss. See, e.g., 

Cavan, 182 F. Supp. 3d at 962–63 (“The burden of establishing that the discovery rule 

applies to delay the statute of limitations rests on plaintiff.”); Anson v. American Motors 

Corp., 747 P.2d 581, 582 (Ariz. Ct. App. 1987) (“The affirmative defense of statute of 

limitations is properly raised in a motion to dismiss where it appears from the face of the 

complaint that the claim is barred. . . . The party opposing the motion then bears the burden 

of proving the statute has been tolled.”); Satamian v. Great Divide Ins. Co., 

No. 22-CV-375, 2023 WL 2250419, *2 (Ariz. Ct. App. Feb. 28, 2023) (“[P]laintiffs bear 

the burden of showing the discovery rule should delay the statute of limitations.”). 

Plaintiff’s claims initially appear barred by statutes of limitation on the face of the 

Complaint, with the relevant conduct occurring between seven and nine years before the 

parties executed the tolling agreement. Accordingly, Plaintiff must set forth enough facts 

in the Complaint to indicate the discovery rule applies to toll the statutes of limitations.

In Cavan v. Maron, the plaintiff claimed a watch he purchased for $2 million did 

not have the original dial as the seller represented. 182 F. Supp. 3d 954 (D. Ariz. 2016). 

Because “the allegations in the Complaint . . . indicate[d] that the watch was delivered” 

more than three years before the plaintiff filed the action, the court found the claims “would 

be barred without the benefit of the discovery rule.” Id. at 963. Thus, the court held the 

plaintiff “has the burden of demonstrating that the discovery rule applies.” Id. at 962–63. 

The plaintiff in Cavan claimed he did not become aware that the watch “may not have the 

original dial” until three years after the purchase. Id. at 958. After he informed the seller, 

the seller admitted he had switched the dial and promised to “take care of it” and replace 

the dial. Id. at 959. The seller did not do so, and the plaintiff sued. Id. But the court found 

the complaint’s allegations were not sufficient to demonstrate the discovery rule applied, 

because the plaintiff did not “explain how [he] exercised reasonable diligence when he did 

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not obtain an independent expert evaluation of the watch until more than three years after 

he received the watch, particularly in light of his assertion that he has ‘relatively limited 

experience.’” Id.

Plaintiff’s Complaint on its face does not demonstrate the discovery rule applies. 

The allegations in the Complaint do not identify precisely when or how Plaintiff discovered 

her claims against Defendant. Plaintiff’s Response to Defendant’s Motion to Dismiss 

asserts Plaintiff first “became suspicious that there was fraudulent activity at play” during 

an April 14, 2017 phone call when Defendant “asked for a list of her damages to help 

[Plaintiff] recover her losses.” (Doc. 13, “Resp.” at 3).4 This phone call is significant 

because it took place just under two years before the parties’ tolling agreement and if this 

is when Plaintiff’s claim accrued, her claims would be viable. But the Complaint does not 

make this assertion. The Complaint’s only mention of the April 14, 2017 phone call are to 

simply state it occurred and the content of Plaintiff’s and Defendant’s discussion. See SAC

¶ 101 (“During an April 14, 2017 telephone conversation with Ms. Kretsch, Defendant 

Barton requested that Ms. Kretsch provide him with her damages, which she thereafter sent 

to Defendant Barton directly.”), ¶ 115 (“As late as April 14, 2017, Defendant Barton 

advised Ms. Kretsch that he would help her recover her losses.”). In fact, the Complaint 

alleges the April 14, 2017 conversation was just the latest example in a “consistent[]” series 

of similar conversations with Defendant and Newman “[t]hroughout the years.” 

SAC ¶¶ 113–115. If the April 14, 2017 conversation was when Plaintiff discovered her 

claims, her Complaint does not so allege. 

Although Plaintiff’s Response does not argue her claims against Defendant accrued 

in connection with the FINRA arbitration, this is the closest Plaintiff comes to identifying 

the time and manner of discovery in the Complaint. Plaintiff alleges she discovered the 

4 Plaintiff’s Response also asserts her “claims did not accrue prior to the execution of the 

tolling agreement because she believed that her fiduciaries were upholding their duties.” 

Resp. at 7. Even setting aside Plaintiff’s contradictory assertion earlier in the Response 

that the claims accrued in 2017, this makes little sense. The parties executed the tolling 

agreement as part of a settlement negotiation. Plaintiff cannot plausibly suggest the claims 

had not accrued while she was engaged in settlement negotiations for those same claims. 

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“extent” or “magnitude” of Defendant’s deception and fraud during the FINRA arbitration. 

SAC ¶¶ 86, 110. Rather, the use of “extent” and “magnitude,” along with Plaintiff’s 

allegation she “would have pursued Defendant Barton . . . in the same proceeding” had he 

been subject to FINRA regulations indicate Plaintiff had knowledge of her claims against 

Defendant before the FINRA arbitration. SAC ¶¶ 81, 86, 110. The Complaint has thus 

failed to allege “the time and manner of discovery.” Cavan v. Maron, 182 F. Supp. 3d 954, 

963 (D. Ariz. 2016).

Even if Plaintiff had adequately alleged the time and manner of discovery, she has 

not sufficiently alleged her “inability to have made earlier discovery despite reasonable 

diligence.” Id. In fact, the Complaint does not allege Plaintiff engaged in any diligence 

whatsoever. Plaintiff does not allege she expressed any concern with or inquired about the 

status of her investments, researched any of the companies she had invested in, or even

asked why the promised “mail box money” never arrived. Presumably, Defendant’s 

repeated assertions he would “make her whole” and that she was “covered” and “would be 

taken care of” were responses to inquiries or complaints from Plaintiff, but the Complaint 

is silent as to Plaintiff’s involvement in these conversations. See SAC ¶¶ 113–114. In 

short, the Complaint contains no allegations Plaintiff exercised any diligence in 

discovering her claim, let alone the reasonable diligence required to avail herself of the 

discovery rule.

Plaintiff’s allegations about Defendant’s and Newman’s “constant promises to 

make [Plaintiff] whole” or statements Plaintiff was “covered” or “would be taken care of” 

do not excuse her failure to exercise reasonable diligence in discovering her claim. 

SAC ¶¶ 113–116. Whether Defendants “subsequently promised to remedy their breach 

has no bearing on whether” Plaintiff knew about the “facts giving rise to her claim.” 

Lytikainen v. Schaffer’s Bridal LLC, 409 F. Supp. 3d 767, 777 (D. Ariz. 2019) (citing Hall 

v. Romero, 685 P.2d 757, 763 (Ariz. Ct. App. 1984) (holding the claim accrued even though 

the breaching party had “promised to perform in the future,” because such future promises 

“did not eradicate the fact that . . . [the breaching party] had already broken its promise to 

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perform”)). Further, the Complaint does not identify how the April 14, 2017 conversation 

was different than her earlier conversations with Defendant (aside from taking place just 

in time to perhaps maintain viable claims for the tolling agreement) or why those earlier 

conversations precluded her from discovering her claims. 

Plaintiff has not set forth facts in the Complaint sufficient to allege the discovery 

rule applies to her claims. Accordingly, Defendants’ Motion with respect to Counts One 

through Nine will be granted. 

B. Shotgun Pleading

 Defendants’ Motion next argues the Complaint is an improper “shotgun 

pleading.” See Mot. at 6–10. Rule 8 requires a short and plain statement of the claim 

showing the plaintiff is entitled to relief. Fed. R. Civ. P. 8(a). And Rule 10 requires a 

plaintiff to state “claims or defenses in numbered paragraphs, each limited as far as 

practicable to a single set of circumstances.” Fed. R. Civ. P. 10(b). 

Defendants cite Casavelli v. Johanson, arguing the Complaint “contains multiple 

counts where each count adopts the allegations of all preceding counts” and “is replete with 

conclusory, vague, and immaterial facts not obviously connected to any particular cause of 

action.” Mot. at 7 (quoting 20-CV-0497, 2020 WL 4732145, at *9 (D. Ariz. Aug. 14, 

2020)). While the Complaint does resemble a shotgun pleading, it is “neither rambling nor 

confusing,” Facciola v. Greenberg Traurig, LLP, 781 F. Supp. 2d 913, 920–21 (D. Ariz. 

2011), and it is not “extremely difficult to identify” the Complaint’s allegations of what 

Defendant did, Plaintiff’s resulting injuries, and the theories of relief Plaintiff seeks to 

articulate, Casavelli, 2020 WL 4732145 at *10. 

C. Damages

 In its final general argument attacking the Complaint, Defendants claim Plaintiff 

has failed to plead the required damages for her claims. See Mot. at 10. Plaintiff responds 

the Complaint alleges damages in each count. Resp. at 12–13. Defendants cite no authority 

supporting their argument. Because the Complaint alleges damages in each count and 

includes specific allegations of losses suffered by Plaintiff, see, e.g., SAC ¶ 54 (“Ms. 

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Kretsch’s investment was rendered worthless.”), ¶ 132 (“Plaintiff’s shares in CLC never 

constituted a 20% ownership stake, as she was previously told.”), Plaintiff has adequately 

alleged damages. 

* * *

While the Court has found Counts One through Nine of the Complaint subject to 

dismissal because the statutes of limitation have expired, Plaintiff’s Complaint has other 

deficiencies that the Court must address. 

D. Arizona Securities Fraud (Count One)

Plaintiff’s first asserted cause of action alleges Defendants violated 

A.R.S. § 44-1991(A)(1) and (A)(2) in connection with her investments in Creative 

Learning Corporation and Spectrum Resources Corporation. SAC ¶¶ 125–39. 

A.R.S. § 44-1991(A)(1) prohibits anyone from employing “any device, scheme, or artifice 

to defraud” in connection with a securities transaction, while A.R.S. § 44-1991(A)(2) 

prohibits making “any untrue statement of material fact” or omitting “any material fact 

necessary” to make a statement “not misleading.” To successfully state a § 1991(A) claim, 

a plaintiff “must set forth facts indicating that each defendant either made, participated in, 

or induced the security transaction at issue.” Allstate Life Ins. Co. v. Robert W. Baird & 

Co., 756 F. Supp. 2d 1113, 1157 (D. Ariz. 2010) (citing A.R.S. § 44-2001(A)). And a 

plaintiff bringing an action under § 44-1991(A)(1) must “state with particularity facts 

giving rise to a strong inference that the defendant acted with the required state of mind”—

knowingly or recklessly—in each alleged act or omission and “specify each alleged untrue 

statement or material omission and the reason or reasons why the statement or omission is 

misleading or the omission is material.” A.R.S. § 44-2082; see also Allstate, 756 F. Supp. 

2d at 1159 (“For claims arising under § 1991(A)(1), a claimant must allege the requisite 

state of mind with particularity.”); Facciola v. Greenberg Traurig, LLP, 781 F. Supp. 2d 

913, 921–22 (D. Ariz. 2011) (denying motion to dismiss on scienter grounds where the 

plaintiffs sufficiently alleged the defendants “acted knowingly or recklessly”). Further, “if 

an allegation regarding the statement or omission is made on information and belief, the 

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complaint shall state with particularity all facts on which that belief is formed.” Id.

Defendants first argue Plaintiff has failed to plead the requisite scienter under 

A.R.S. § 44-1991(A)(1). Mot. at 11. In response, Plaintiff points to two specific 

paragraphs of the Complaint and cites to cases interpreting the federal Private Securities 

Litigation Reform Act (“PSLRA”), which she claims is illustrative, to assert the Complaint, 

taken as a whole, shows the requisite scienter. Resp. at 13–14. Defendants assert the 

PSLRA is not applicable since Plaintiff has not alleged any claims under federal securities 

law and that the two Complaint paragraphs Plaintiff cites only allege conduct on Newman’s 

part. See Reply at 6–7; SAC ¶ 45 (“In April 2011, Newman solicited Ms. Kretsch to invest 

in Spectrum . . .”), ¶ 59 (“Newman, of course, thought of Ms. Kretsch to fund the shell 

company . . .”). 

Though Plaintiff cites no authority for her claim that the PSLRA is illustrative, it 

appears the scienter requirements of the two statutes are analogous. Compare 15 U.S.C. 

§ 78u–4(b)(2) with A.R.S. § 44-2082(B). But even “assessing the allegations holistically,” 

see Resp. at 13 (quoting South Ferry LP, No. 2 v. Killinger, 542 F.3d 776, 784 (9th Cir. 

2008)), Plaintiff has failed to identify any allegations in the Complaint which specifically 

address Defendant’s state of mind. Instead, Plaintiff seeks to impute Newman’s scienter 

to Defendant. Plaintiff has not adequately alleged scienter and has not sufficiently stated 

a claim under A.R.S. § 44-1991(A)(1).

E. Negligent Misrepresentation, Control Person Liability, Constructive 

Fraud, and Fraud (Counts Two, Three, Four, and Six)

Count Two alleges Defendant committed negligent misrepresentation by supplying 

“false information to Plaintiff regarding the true nature of the advice and services he offered 

to Plaintiff.” SAC ¶¶ 140–45. Count Three alleges “Defendant is vicariously liable as a 

‘controlling person’ for Newman’s violations of Arizona securities laws.” Id. at ¶ 147. 

Count Four alleges “Defendant committed constructive fraud by breaching his duty to 

make full disclosure to Plaintiff.” Id. at ¶ 164. And Count Six alleges Defendant 

committed fraud against Plaintiff in connection with her investments. Id. at ¶¶ 183–192. 

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Aside from arguing the Court should dismiss these counts as time barred and 

improper “shotgun pleadings,” see Mot. at 3, 8, Defendants do not address these claims. 

Thus, the Court will not address the merits of these claims.

F. Civil Conspiracy (Count Five)

Count Five alleges “Defendant and Newman conspired to cause Newman to breach 

his fiduciary duty to Plaintiff.” SAC ¶ 171.5 “For a civil conspiracy to occur” under 

Arizona law, “two or more people must agree to accomplish an unlawful purpose or to 

accomplish a lawful object by unlawful means, causing damages.” Wells Fargo Bank v. 

Arizona Laborers, Teamsters & Cement Masons Loc. No. 395 Pension Tr. Fund, 38 P.3d 

12, 36 (Ariz. 2002) (quoting Baker v. Stewart Title & Trust of Phoenix, 5 P.3d 249, 256 

(Ariz. Ct. App. 2000)). “When pleading a claim for civil conspiracy, a plaintiff must plead 

with particular specificity as to the manner in which a defendant joined in the conspiracy 

and how he participated in it.” Armstrong v. Reynolds, 22 F.4th 1058, 1085 (9th Cir. 2022)

(internal quotations omitted). 

Defendants argue Plaintiff has not met the heightened pleading standard for 

conspiracy because she failed to “allege facts such as a specific time, place, or person 

involved in the alleged conspiracies to give a defendant seeking to respond to allegations 

of a conspiracy an idea of where to begin.” Mot. at 11–12 (internal quotations omitted). 

Plaintiff claims she has pled an agreement “with particular specificity as to the manner in 

which a defendant joined the conspiracy and how he participated in it.” Resp. at 14 

(quoting Armstrong v. Reynolds, 22 F4th 1058, 1085 (9th Cir. 2022)). The Court agrees. 

The Complaint specifically alleges Newman worked as Defendant’s agent, the actions 

Newman took on Defendant’s behalf, and how Defendant benefitted. This is sufficient to 

give Defendants “an idea of where to begin,” see Mot. at 11, in responding. Plaintiff has 

sufficiently alleged an agreement between Defendant and Newman.

5 Count Five also appears to include claims of conspiracy to commit fraud and knowingly 

make false statements of material fact. See SAC ¶¶ 173–74. Neither party addresses these 

claims, and the Court will not address them. 

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Defendants further argue Plaintiff has not adequately pled the underlying tort of 

breach of fiduciary duty because her assertion “that Newman owes her a fiduciary duty as 

her ‘financial and/or investment advisor’” is conclusory and insufficient because Plaintiff 

did not allege any “peculiar reliance in the trustworthiness” of Newman. Mot. at 12. 

Plaintiff claims Newman “was a registered representative of GVC working as an

investment advisor, making it almost impossible for him not to owe her a fiduciary duty.” 

Resp. at 14 (emphasis in original). Plaintiff cites no authority for this claim. 

There is no caselaw in Arizona stating financial advisors necessarily owe their 

clients a fiduciary duty. While a financial advisor may owe a fiduciary duty, Arizona courts

only find such a duty where there is an “intimate and decades-long relationship of advice 

and confidence” between the parties. In re Est. of Meinel, No. 2 CA-CV 2016-0032, 2016 

WL 6108408, at *3 (Ariz. Ct. App. Oct. 19, 2016) (citing Stewart v. Phoenix Nat. Bank, 

64 P.2d 101, 104, 106–07) (Ariz. 1937)); see also Standard Chartered PLC v. Price 

Waterhouse, 945 P.2d 317, 335–37 (Ariz. Ct. App. 1996) (declining to find a fiduciary 

relationship between financial firm and client, finding “trust, confidence, and reliance, 

though necessary components, do not suffice to establish a fiduciary relationship”). In 

declining to find a fiduciary duty, one unpublished case from this District suggested a 

plaintiff may establish a fiduciary duty for a financial advisor by showing (1) the defendant 

acted as the plaintiff’s financial advisor; and (2) the plaintiff relied on the defendant’s 

financial advice. See Mortensen v. Home Loan Ctr., Inc., No. 08-CV-1669, 2010 WL 

3002109, at *6 (D. Ariz. July 29, 2010) (citing McAlister v. Citibank, 829 P.2d 1253, 1258 

(Ariz. Ct. App. 1992)). But the case the district court cited does not support this 

proposition. The McAlister court summarized the holding of Stewart v. Phoenix National 

Bank—which found a fiduciary relationship where a bank “acted as the customer’s 

financial advisor for many (twenty-three) years”—but declined to find a fiduciary duty 

where the plaintiff did not show the defendant acted as a financial advisor nor that he relied 

on the defendant’s advice. 829 P.2d at 1258. Thus, a defendant acting as a financial 

advisor and a plaintiff’s reliance on the defendant’s advice are necessary to establish a 

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fiduciary relationship, but not sufficient. And Plaintiff has not alleged sufficient facts to 

support her claim that Newman owed her a fiduciary duty. Plaintiff has failed to state a 

claim for civil conspiracy.

G. Aiding and Abetting Tortious Conduct (Count Seven)

Count Seven alleges Defendant aided and abetted Newman’s tortious conduct. 

SAC ¶¶ 193–200. This count includes three separate aiding and abetting claims: (1) aiding 

and abetting negligence; (2) aiding and abetting breach of fiduciary duty; and (3) aiding 

and abetting negligent misrepresentation. Id. at ¶ 195. A claim for aiding and abetting 

tortious conduct under Arizona law requires: (i) the primary tortfeasor committed a tort 

causing injury to the plaintiff; (ii) the defendant knew the primary tortfeasor breached a 

duty; (iii) the defendant substantially assisted or encouraged the primary tortfeasor in 

breaching the duty; and (iv) a causal relationship between the defendant’s assistance or 

encouragement and the primary tortfeasor’s breach. Sec. Title Agency, Inc. v. Pope, 200 

P.3d 977, 988 (Ariz. Ct. App. 2008). 

Defendants correctly argue Plaintiff’s claims of aiding and abetting negligence and 

negligent misrepresentation fail because Arizona does not recognize a claim for aiding and 

abetting negligence. Mot. at 13 (citing Dube v. Likins, 167 P.3d 93, 100 (Ariz. Ct. App. 

2007)). Plaintiff does not challenge Defendants’ interpretation of Arizona law. Thus, 

Plaintiff’s claims for aiding and abetting negligence and aiding and abetting negligent 

misrepresentation fail. 

Defendants further argue Plaintiff’s aiding and abetting breach of fiduciary duty

claim fails because Plaintiff has not sufficiently alleged Newman owed Plaintiff a fiduciary 

duty. Mot. at 13–14. The Court agrees. As discussed regarding Plaintiff’s civil conspiracy 

claim, see supra Section F, Plaintiff has failed to sufficiently plead Newman owed her a 

fiduciary duty. Plaintiff has failed to state a claim for aiding and abetting tortious conduct.

H. Negligent / Intentional Infliction of Emotional Distress (Counts Eight 

and Nine)

Count Eight alleges negligent infliction of emotional distress (“NIED”). 

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SAC ¶¶ 201–06. Under Arizona law, an NIED claim is available where (i) the plaintiff 

witnesses an injury to another person or (ii) the plaintiff suffers emotional distress from an 

event that endangered plaintiff but did not physically injure her. See Quinn v. Turner, 745 

P.2d 972, 973 (Ariz. Ct. App. 1987). Plaintiff does not allege she witnessed an injury to 

another person, so her NIED claim falls into the latter category. To state a direct NIED 

claim, a plaintiff must allege (i) the defendant was negligent; (ii) the defendant’s 

negligence created an unreasonable risk of bodily harm to the plaintiff; (iii) the defendant’s 

negligence caused the plaintiff emotional distress; and (iv) the plaintiff suffered physical 

injury or illness due to the emotional distress. Rev. Ariz. Jury Instr. (Civ.) Negligence 9 

(6th ed. 2018) (citing Quinn, 745 P.2d 972; Restatement (Second) of Torts §§ 436(2), 

426A). 

Count Nine alleges intentional infliction of emotional distress (“IIED”). 

SAC ¶¶ 207–12. The elements of an IIED claim under Arizona law are: (i) the defendant’s 

conduct was “extreme” or “outrageous;” (ii) the defendant intended to cause emotional 

distress or recklessly disregarded a “near certainty that such distress” would result from the 

conduct; and (iii) the conduct caused severe emotional distress. Ford v. Revlon, Inc., 734 

P.2d 580, 585 (Ariz. 1987). To be outrageous or extreme, conduct must go “beyond all 

possible bounds of decency” and be “regarded as atrocious and utterly intolerable in a 

civilized community.” Id. (citation omitted). Examples of emotional distress held 

sufficiently “severe” include heart attack, premature birth of a dead baby, severe 

nervousness rendering the victim unable to perform her job, severe stress and anxiety 

requiring hospitalization, or stress resulting in permanent impairment of an existing 

medical condition. Wray v. Greenberg, 646 F. Supp. 3d 1084, 1108 (D. Ariz. 2022) (citing 

Midas Muffler Shop v. Ellison, 650 P.2d 496, 501 (Ariz. Ct. App. 1982)). 

Defendants argue these claims fail because Plaintiff “merely recites the legal 

elements of each cause of action and claims they have been met,” and Plaintiff does not 

sufficiently plead physical or emotional distress. Mot. at 9–10. Plaintiff does not respond 

to Defendant’s arguments regarding her NIED and IIED claims. While Plaintiff’s failure 

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to respond constitutes abandonment, see, e.g., Doe v. Dickinson, 615 F. Supp. 2d 1002, 

1011 (D. Ariz. 2009), her claims fail for other reasons. 

First, Plaintiff has not adequately pled an NIED claim. When the plaintiff does not 

witness injury to another person, an NIED claim requires the plaintiff to have been “within 

the zone of danger, i.e.—the defendant’s negligence must have created an unreasonable 

risk of bodily harm” to the plaintiff. Quinn v. Turner, 745 P.2d 972, 974 (Ariz. Ct. App. 

1987). Plaintiff does not make such an allegation. Rather, she simply alleges “Defendant’s 

negligence created an unreasonable risk of injury to Plaintiff.” SAC ¶ 203. The underlying 

subject of this cause of action is alleged fraud, not a risk of physical injury. And as 

Defendants argue, Plaintiff’s Complaint merely recites the elements of the claim with no 

facts. SAC ¶¶ 201-06. These conclusory and unsupported allegations cannot sustain her 

claim. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atlantic Corp. v. Twombly, 

550 U.S. 544, 555 (2007)) (“Threadbare recitals of the elements of a cause of action, 

supported by mere conclusory statements, do not suffice.”). Plaintiff has not stated a claim 

for NIED. 

Plaintiff has also failed to state a claim for IIED. Again, the Complaint simply 

recites the elements of the claim, rendering the claim subject to dismissal. 

SAC ¶¶ 207–212. In particular, Plaintiff fails to allege what conduct gives rise to her IIED 

claim, let alone why or how that conduct was “extreme” or “outrageous.” Again, Plaintiff 

does not detail her purported “emotional distress” or how it manifested as severe enough 

to sustain an IIED claim. Plaintiff has not stated a claim for IIED. 

I. Breach of Contract (Count Ten)

Count Ten alleges breach of a settlement agreement between the parties under which 

Defendant and Newman agreed to pay Plaintiff $500,000 in stock. SAC ¶¶ 122–124, 213–

222. Defendants argue no valid contract existed between the parties and attach a copy of 

the alleged agreement to their Motion. Mot. at 14. 

A district court may consider extraneous documents on a motion to dismiss where 

“(1) the complaint refers to the document; (2) the document is central to the plaintiff’s 

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claim; and (3) no party questions the authenticity of the copy attached to the 12(b)(6) 

motion.” Rand v. Midland Nat’l Life Ins., 857 Fed. App’x 343, 346 (9th Cir. 2021) (quoting 

Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006)). The alleged contract consists of an 

email exchange between Mark Chester (representing Newman) and Justin Nelson 

(representing Plaintiff). (Doc. 12-1). The Complaint refers to this document, see 

SAC ¶¶ 122–124, 213–222, and the alleged contract appears central to Plaintiff’s breach

claim. Plaintiff does not dispute its authenticity in her Response to Defendants’ Motion. 

See generally Resp. Thus, the Court will consider it. 

Defendants argue no contract exists between the parties because Mr. Chester 

expressly stated he did not represent Defendant, so any agreement was only between 

Plaintiff and Newman. Mot. at 14–15. And even if Defendant was a party to the 

negotiations, Plaintiff did not legally accept Mr. Chester’s offer, because her purported

acceptance was conditional and changed material terms of the offer by requiring a tolling 

agreement and requesting further discussions about how to apportion the payment of stock. 

Id. Plaintiff does not respond to these arguments and instead points to the allegations in 

her complaint, asserting she has adequately pled: (i) a valid contract exists, (ii) Defendant 

breached the contract, (iii) resulting in damages to Plaintiff. Resp. at 15. 

While Plaintiff’s allegations might suffice to plead a breach of contract claim on 

their face, the alleged contract contradicts them. An offeree must unequivocally accept the 

offer to create a valid contract. See Richards v. Simpson, 531 P.2d 538, 540 (Ariz. 1975) 

(“To create mutual consent and therefore a contract, acceptance of the offer must be 

unequivocal.”); Ficalora v. Int’l Bus. Machines Corp., 124 F.3d 211 (9th Cir. 1997) 

(“Under settled principles of contract law, [the] September 17 letter was a counteroffer, not 

an acceptance, because it imposed additional conditions.”); Beretta v. Tucson Trap & Skeet 

Club, No. 2 CA-CV 2007-0009, 2007 WL 5556383, at *2 (Ariz. Ct. App. Aug. 16, 2007) 

(“Mutual consent to a contract can only exist when acceptance of the offer is 

unequivocal.”). Plaintiff’s purported acceptance stated that she “would like to 

conditionally accept the counteroffer,” required Defendant and Newman to execute a 

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tolling agreement, and invited further discussion of how to apportion the shares that 

Plaintiff would receive. (Doc. 12-1). This expressly conditional “acceptance” constitutes 

a counteroffer. And since Plaintiff has not alleged Defendant accepted this counteroffer, 

no valid contract exists. Thus, the Court will dismiss Count Ten of Plaintiff’s Complaint. 

In addition to dismissal of this count, Defendants request an order granting them 

their attorneys’ fees and costs under A.R.S. §§ 12-341 and 12-341.01, which allow for fees 

awards to successful parties in contested contract actions. Defendants may renew this 

request, if appropriate, following final judgment in this case. 

CONCLUSION

Plaintiff has failed to adequately allege each of her ten claims against Defendants. 

Accordingly, 

IT IS ORDERED Defendants’ Motion to Dismiss (Doc. 12) is GRANTED.

Plaintiff’s Complaint (Doc. 11) is DISMISSED WITH LEAVE TO AMEND. If Plaintiff 

amends, she must file an amended complaint within fourteen days of this Order and 

Defendants shall respond to it by the deadline required by the Federal Rules of Civil 

Procedure. If Plaintiff does not amend, no later than fourteen days of this Order Plaintiff 

must file a statement setting forth that no amendment will be filed. 

Dated this 6th day of March, 2024.

Honorable Roslyn O. Silver

Senior United States District Judge

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