Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_13-cv-01312/USCOURTS-azd-2_13-cv-01312-2/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1330 Breach of Contract

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Ken Gazian, et al., 

Plaintiffs, 

v. 

Wells Fargo Bank NA, et al., 

Defendants.

No. CV-13-01312-PHX-DGC

ORDER 

 Plaintiffs Ken Gazian, Pierre Investments, Inc., and Aragadz Foods, Inc. d/b/a 

Devanche Jewelers have filed a motion for leave to file a second amended complaint. 

Doc. 59. Defendants Hubert Kelly and Kelly and Kelly, P.C. (collectively the “Kelly 

Defendants”) have filed a motion to dismiss Defendant Wells Fargo Bank NA’s crossclaim against them or, in the alternative, to bifurcate. Doc. 60. The motions are fully 

briefed. For the reasons that follow, the Court will deny the motion for leave to amend 

and deny the motion to dismiss or bifurcate.1

 

I. Background. 

Plaintiffs filed this action in Texas state court in October 2012, and it was 

removed to the United States District Court for the Northern District of Texas on 

October 26, 2012. Doc. 1. On June 28, 2013, Judge O’Connor ordered that the case be 

 

1

 The request for oral argument is denied because the issues have been fully briefed and oral argument will not aid the Court’s decision. See Fed. R. Civ. P. 78(b); 

Partridge v. Reich, 141 F.3d 920, 926 (9th Cir. 1998). 

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transferred to this Court. Doc. 39. Plaintiffs filed their First Amended Complaint 

(“FAC”) on October 28, 2013, asserting a number of claims against the Kelly Defendants 

and Wells Fargo arising out of an allegedly “fraudulent scheme orchestrated by the Kelly 

Defendants.” Doc. 51, ¶ 9. Plaintiffs allege that they paid $80,000 to the Kelly 

Defendants for a transaction that the Kelly Defendants asserted was worth more than 

$45,000,000 and “would yield a return of $280,000” for Plaintiffs. Id., ¶ 10. Plaintiffs 

allege that Wells Fargo “assured Plaintiffs on multiple occasions” that the transaction was 

valid,” and confirmed that the Kelly Defendants had an account at Wells Fargo with 

“funds in excess of $280,000.” Id., ¶¶ 11, 14. Plaintiffs claim that they entered into an 

“Irrevocable Commitment” with the Kelly Defendants and Wells Fargo that set forth the 

terms discussed above. Id., ¶ 12. 

 Plaintiffs assert that they were convinced by the Kelly Defendants in October 2011 

to reinvest the $280,000 promised by the Irrevocable Commitment – rather than 

withdrawing it as scheduled – to “fund a $5,000,000 loan to purchase and renovate” an 

office tower in Dallas. Id., ¶ 16. Plaintiffs also agreed to pay an additional $50,000 to 

fund the transaction. Id. Plaintiffs assert that on November 29, 2011, when they 

attempted to transfer the funds guaranteed by the Irrevocable Commitment to the Kelly 

Defendants, they “were informed by Wells Fargo that the accounts had been emptied and 

that Wells Fargo would not pay any amount to Plaintiffs pursuant to the Irrevocable 

Commitment.” Id., ¶ 21. 

 The day after Plaintiffs’ FAC was filed, the Kelly Defendants filed a notice of 

settlement. Doc. 53. Wells Fargo answered Plaintiffs’ FAC on November 15, 2013, and 

asserted a cross-claim for indemnity against the Kelly Defendants. Doc. 56. The Court 

dismissed Plaintiffs’ complaint as to the Kelly Defendants on November 26, 2013. 

Doc. 58. Plaintiffs’ motion for leave to amend and the Kelly Defendants’ motion to 

dismiss or bifurcate followed on December 6, 2013. Docs. 59, 60. 

II. Leave to Amend. 

The Court’s case management order entered on August 29, 2013, established a 

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deadline for amending pleadings of October 28, 2013. Doc. 50 at 1. Plaintiffs’ motion 

was filed on December 6, 2013, well after the deadline. See Doc. 59. Plaintiffs’ motion, 

in effect, asks the Court to extend the deadline for amending pleadings. 

 A schedule established under Rule 16 of the Federal Rules of Civil Procedure may 

be extended only upon a showing of “good cause.” Fed. R. Civ. P. 16(b)(4). Rule 16’s 

good cause standard primarily considers the diligence of the party seeking the 

amendment. Johnson v. Mammoth Recreation, Inc., 975 F.2d 604, 609 (9th Cir. 1992). 

“The district court may modify the pretrial schedule ‘if it cannot reasonably be met 

despite the diligence of the party seeking the extension.’” Id. (quoting Fed. R. Civ. P. 16 

advisory committee notes (1983 amendment)). 

 Plaintiffs’ motion does not address the good cause requirement, much less show 

good cause for extending the amendment deadline. The Court will therefore deny the 

motion. 

III. Cross-Claim. 

 A. Motion to Dismiss. 

When analyzing a complaint for failure to state a claim to relief under 

Rule 12(b)(6), the well-pled factual allegations are taken as true and construed in the light 

most favorable to the nonmoving party. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th 

Cir. 2009). Legal conclusions couched as factual allegations are not entitled to the 

assumption of truth, Ashcroft v. Iqbal, 556 U.S. 662, 680 (2009), and therefore are 

insufficient to defeat a motion to dismiss for failure to state a claim, In re Cutera Sec. 

Litig., 610 F.3d 1103, 1108 (9th Cir. 2010). To avoid a Rule 12(b)(6) dismissal, the 

complaint must plead enough facts to state a claim to relief that is plausible on its face. 

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). This plausibility standard “is not 

akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a 

defendant has acted unlawfully.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 

556). “[W]here the well-pleaded facts do not permit the court to infer more than the mere 

possibility of misconduct, the complaint has alleged – but it has not ‘show[n]’ – ‘that the 

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pleader is entitled to relief.’” Id. at 679 (quoting Fed. R. Civ. P. 8(a)(2)). 

 The Kelly Defendants rely heavily on Plaintiffs’ Second Amended Complaint 

(“SAC”) as a basis for their motion to dismiss. They argue that “Plaintiffs have 

abandoned any allegations that Wells Fargo was a guarantor of the Irrevocable 

Commitment with their proposed Second Amended Complaint, and no party currently 

contends that Wells Fargo is obligated to pay any amount as a guarantor.” Doc. 60 at 4. 

They also argue that the SAC effectively eliminates contract claims, leaving only tort 

claims against Wells Fargo, and that Wells Fargo cannot obtain indemnification for tort 

claims against the Kelly Defendants because Arizona and Texas have barred such claims. 

As noted above, the Court has denied Plaintiffs’ motion for leave to file the SAC. The 

Kelly Defendants therefore cannot rely upon that pleading as the basis for their motion. 

 The Kelly Defendants’ arguments regarding the abolishment of indemnification 

claims are deficient for several other reasons. They acknowledge that the abolition of 

joint and several liability in Texas and Arizona (and the related abolition of contribution 

actions, which they equate to abolishing indemnification in this case) has several 

exceptions, but they do not discuss the exceptions in any detail or explain why they do 

not apply here. The Kelly Defendants also argue that Texas law applies because the law 

applicable to a case does not change upon transfer of venue, but they do not explain why 

Texas law would have applied in this case before the transfer of venue. A choice of law 

analysis may be required in this case. In addition, the Kelly Defendants argue for the first 

time in their reply that Wells Fargo’s cross-claim is deficient under the Supreme Court’s 

decisions in Twombly and Iqbal. Doc. 66 at 4. The Court will not consider arguments 

raised for the first time in a reply brief. Lentini v. Cal. Center for the Arts, Escondido, 

370 F.3d 837, 843 n. 6 (9th Cir. 2004). 

 Finally, the Kelly Defendants argue that Texas’ circuity of action doctrine would 

bar Wells Fargo’s indemnity claim. Doc. 60 at 6. In addition to the unresolved question 

of whether Texas law applies, Wells Fargo points out that the cited authority would 

support the dismissal of Plaintiffs’ claims based on the circuity of action doctrine, not 

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Wells Fargo’s claims. Doc. 65 at 8; see also In re El Paso Refinery, LP, 302 F.3d 343, 

349-50 (5th Cir. 2002) (noting that “Texas courts apply the circuity of action doctrine to 

extinguish a plaintiff’s cause of action when, as a result of indemnification obligations or 

settlement agreements between parties, a plaintiff would end up indemnifying another 

party for its own original claim”). Wells Fargo is correct. This argument also does not 

provide a basis for dismissing Wells Fargo’s claim. The Court will deny the Kelly 

Defendants’ motion to dismiss. 

B. Motion to Bifurcate. 

The Kelly Defendants argue in the alternative that the Court should bifurcate 

Wells Fargo’s indemnity claims for a separate trial. Doc. 60 at 7. They argue that if they 

“were required to litigate the indemnity claims at this time, they would lose one of the 

most important benefits of settlement” because they “would be forced to incur all the 

costs of litigation solely on the basis of the dubious indemnity claims filed by Wells 

Fargo[.]” Id. The Kelly Defendants further argue that bifurcation would promote 

judicial economy because the Court “may not need to reach any indemnification claim.” 

Id. at 8. Finally, the Kelly Defendants argue that Wells Fargo would not be prejudiced by 

bifurcation because the indemnification claims “cannot be litigated in any practical 

purpose until a judgment determines that Wells Fargo is without fault[.]” Id. at 9. 

 Wells Fargo counters that bifurcation is not appropriate because “[t]he 

determination of Wells Fargo’s fault (if any) for Plaintiffs’ losses and the indemnity 

liability of the Kelly Defendants to Wells Fargo will involve the same witnesses and 

documentary evidence.” Doc. 65 at 11. Wells Fargo also contends that it would be 

prejudiced by bifurcation because it “would be forced to litigate the same issues twice, 

risk inconsistent verdicts or findings, and lose the efficiency of having the Kelly 

Defendants as parties, subject to the normal rules of discovery, in the Plaintiffs’ action.” 

Id. at 13. 

 The Kelly Defendants have neither demonstrated that bifurcating Wells Fargo’s 

cross-claim would avoid prejudice, nor that it would promote convenience or judicial 

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economy. As Wells Fargo notes, the witnesses and evidence required for their crossclaim are the same as those required for the underlying claim. Bifurcating this case could 

result in discovery being conducted twice, once in the main action and a second time in 

the indemnification action. In addition, legal issues and other motions to be resolved by 

the Court should be resolved only once, with all parties participating fully. 

 IT IS ORDERED that Plaintiffs’ motion for leave to amend (Doc. 59) is denied. 

The Kelly Defendants’ motion to dismiss or, in the alternative, to bifurcate (Doc. 60) is 

also denied. 

 Dated this 18th day of February, 2014. 

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