Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_14-cv-00175/USCOURTS-casd-3_14-cv-00175-0/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:1332 Diversity-Fraud

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

KERRY BOULTON

Plaintiff,

CASE NO. 14cv00175-GPC-RBB

ORDER GRANTING IN PART AND

DENYING IN PART PLAINTIFF’S

MOTION FOR LEAVE TO FILE A

SECOND AMENDED COMPLAINT

[Dkt. Nos. 26, 29.]

vs.

AMERICAN TRANSFER

SERVICES, INC., U.S. TAX LIEN

ASSOCIATION, STEVE

CLEMENTS, TONY MARTINEZ,

SAEN HIGGINS, SPIKE HUMER,

RICHARD MEDINA, JR., ANA

GUERRA DURAN, RUBEN

SANCHEZ,

Defendant.

INTRODUCTION

Before the Court is Plaintiff Kerry Boulton’s (“Plaintiff”) Motion for Leave to

File a Second Amended Complaint pursuant to Federal of Civil Procedure (“Rule”)

15(a). (Dkt. No. 26.) Plaintiff seeks to add a civil RICO cause of action and to add

additional Plaintiffs. (Dkt. No. 26.) Defendants Ruben Sanchez and American

Transfer Services, Inc.(“ATS”) also filed a motion to dismiss the first amended

complaint. (Dkt. No. 29.) The motion is submitted on the papers without oral

argument pursuant to Civil Local Rule 7.1(d)(1). Based on the reasoning below, the

Court GRANTS in part and DENIES in part Plaintiff’s motion for leave to file a

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second amended complaint. Additionally, the Court DENIES Defendants Sanchez and

ATS’s Motion to Dismiss for Failure to State a Claim as moot.

FACTUAL BACKGROUND 

Plaintiff is a resident of Melbourne, Australia. (Dkt. No. 17, FAC ¶ 7.) In the

first amended complaintPlaintiff alleges Defendants ATS and Sanchez, as an employee

of ATS, fraudulently induced Plaintiff to purchase tax liens and/or tax deeds in the

United States. (Id. ¶ .) Defendant ATS purports to be a company “that will open up

a business for foreign citizens to acquire interests in real estate related to tax liens

and/or tax deeds for profit” by providing Sole Proprietorship Registration, U.S.

Employer Identification number, U.S. Banking Facilitation and a U.S. mailing address. 

(Id. ¶¶ 12, 13.) Defendants receive funds from foreigners to “open and (sic) account”

and then takes controls of the funds. (Id. ¶ 15.) Defendants claim they will arrange

for transfers between appropriate bank accounts to pay ATS its fees and for Plaintiff

to have funds available to make investments in U.S. tax liens and tax deeds. (Id.) ATS

asks for money to be wired to an ATS account and then ATS will set up sub-accounts

for the clients to transfer money into in order to make the investments. (Id. ¶ 16.) 

These representations were made to Plaintiff. (Id. ¶ 14.) 

Plaintiff provided the total of $156,000 to Defendants in two installments of

$1,000 and $155,000. (Id. ¶ 19.) Defendants assumed control of the funds and never

transferred themto the purported “sub account” which would have beenmade available

to her to exercise the proper control. (Id. ¶ 20.) She has made numerous demands for

the return of her funds which have failed. (Id. ¶ 21.) Plaintiff alleges causes of action

for breach of contract, conversion and money had and received. 

PROCEDURAL BACKGROUND

On January 24, 2014, Plaintiff filed a complaint against Defendants ATS, Steve

Clements, Ana Guerra Duran, Saen Higgins, Spike Humer, Tony Martinez, Richard

Medina, Jr., Ruben Sanchez, and U.S. Tax Lien Association for (1) money had and

received, (2) conspiracy through conversion, (3) breach of contract, (4) fraud, and (5)

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fraud–promise without intent to perform. (Dkt. No. 1.) On March 4, 2014, Defendant

Richard Medina, Jr. filed a Motion to Dismiss for Failure to State a Claim. (Dkt. No.

14.) On the same date, Defendants Ana Guerra Duran and Ruben Sanchez filed a

Motion to Dismiss for Failure to State a Claim. 

On March 25, 2014, Plaintiff filed a first amended complaint (“FAC”) against

Defendants ATS and Ruben Sanchez. (Dkt. NO. 17.) On April 28, 2014, the Court

denied Defendants Ruben Sanchez and Anna Guerra Duran’s motion to dismiss the

original complaint as moot. (Dkt. No. 23.) On May 2, 2014, Plaintiff filed a Notice

of Voluntary Dismissal as to Defendant Ana Guerra Duran. (Dkt. No. 24.) 

On June 10, 2014, Plaintiff filed a Motion for Leave to File Amended Complaint

to Add a Claim for Civil RICO and Additional Plaintiffs. (Dkt. No. 26.) On June 27,

2014, Defendants Ruben Sanchez and ATS filed an opposition. (Dkt. No. 28.) On July

11, 2014, Plaintiff filed a Reply. (Dkt. No. 31.) 

On July 1, 2014, Defendants Ruben Sanchez and ATS filed a Motion to Dismiss

for Failure to State a Claim. (Dkt. No. 29.) On July 15, 2014, Plaintiff filed an

opposition. (Dkt. No. 32.) On July 22, 2014, Defendant filed a reply. (Dkt. No. 33.)

DISCUSSION

I. Federal Rule of Civil Procedure 7(b)

As an initial argument, Defendants argue that the Court should deny Plaintiff’s

motion for leave to file a second amended complaint by failing to meet the particularity

requirements of Rule 7(b) because Plaintiff failed to attach the proposed amended

complaint to her motion. Plaintiff opposes contending that neither the Federal Rules

nor the Local Civil Rules require that a proposed amendment be attached to a motion

for leave to amend a complaint. 

Rule 7(b) of the Federal Rules of Civil Procedure provides that a motion must

“state with particularity the grounds for seeking the order; and state the relief sought.” 

Fed. R. Civ. P. 7(b). 

Defendants cite to other circuits to support their argument that a proposed

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pleading must be attached with a motion for leave to amend a complaint. However,

these circuits also hold that a supporting brief that contains the basis of a proposed

amendment could be sufficient to grant a motion for leave to amend a complaint. See

Wolgin v. Simon, 722 F.2d 389, 396 (8th Cir. 1983) (appellant did not submit a

proposed amendment and in its brief, did not indicate what an amended complaint

would have contained); United States ex rel. Doe v. Dow Chem. Co., 343 F.3d 325,

330-31 (5th Cir. 2003) (“absence of any proposed amendments, compounded by lack

of grounds for such an amendment” justifies denial of the motion to amend the

complaint). Where a local rule requires that a party seeking leave to amend attach a

proposed pleading, the Ninth Circuit has held that district courts do not abuse their

discretion by denying leave to amend based on the party’s failure to attach a proposed

amended complaint. Gardner v. Martino, 563 F.3d 981, 991 (9th Cir. 2009); Waters

v. Weyerhaeuser Mortg. Co., 582 F.2d 503, 507 (9th Cir. 1978). 

However, in this district, the Local Rules for the Southern District of California

do not require a party to file a proposed pleading when seeking leave to amend a

complaint. See Stone v. Advance America, No. 08cv1549-WQH(WMc), 2009 WL

2242350, at *2 (S.D. Cal. July 24, 2009) (failure to attach a proposed amendment was

not fatal because Plaintiff’s substantive claims would remain by the addition of two

proposed class representatives). Based on the caselaw, even if no proposed amended

pleading is attached to a motion for leave to amend, it appears that if the brief

supporting a motion for leave to amend the complaint, itself, provides the facts and

legal theories to support grounds for an amended complaint, the failure to attach a

proposed amended complaint is not critical. See Gardner, 563 F.3d at 991 (appellant

failed to include a proposed copy of the amended complaint and the court noted that

appellants did not propose any new facts or legal theories for an amended complaint

and gave the Court no basis to allow an amendment). 

In her briefing, Plaintiff seeks to add civil RICO as another cause of action and

provides a sufficient factual basis to bring such a claim. To state a claim for civil

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RICO, a plaintiff must allege “(1) conduct (2) of an enterprise (3) through a pattern (4)

of racketeering activity.” Odom v. Microsoft Corp., 486 F.3d 541, 547-48 (9th Cir.

2007). Elements of federal wire fraud are 1) a scheme to defraud; 2) use of the wires

in furtherance of the scheme and 3) the specific intent to defraud. U.S. v. McNeil, 320

F.3d 1034, (9th Cir. 2003). Plaintiff asserts that Defendants solicited individuals

abroad to conduct business with them with the intent to defraud. (Dkt. No. 31 at 4.)

Plaintiff alleges the funds were transferred via money wire. (Id.) Furthermore,

Plaintiff alleges that Defendant’s engaged in pattern racketeering activity, by reaching

out to several individuals. (Dkt. No. 26 at 6.) Therefore, the Court finds that Plaintiff

has provided sufficient particularity of the grounds itseeks to amend under Rule 7(b).

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II. Federal Rule of Civil Procedure 15

Under Federal Rule of Civil Procedure (“Rule”) 15(a), leave to amend a

complaint after a responsive pleading has been filed may be allowed by leave of the

court and “shall freely be given when justice so requires.” Foman v. Davis,

371 U.S. 178, 182 (1962); Fed. R. Civ. P. 15(a). Granting leave to amend rests in the

sound discretion of the trial court. Internat’l Ass’n of Machinists & Aerospace

Workers v. Republic Airlines, 761 F.2d 1386, 1390 (9th Cir. 1985). This discretion

must be guided by the strong federal policy favoring the disposition of cases on the

merits and permitting amendments with “extreme liberality.” DCD Programs Ltd. v.

Leighton, 833 F.2d 183, 186 (9th Cir. 1987). “This liberality in granting leave to

amend is not dependent on whether the amendment will add causes of action or

parties.” Id.; but see Union Pacific R.R. Co. v. Nevada Power Co., 950 F.2d 1429,

1432 (9th Cir. 1991) (In practice, however, courts more freely grant plaintiffs leave to

amend pleadings in order to add claims than new parties). 

Courts ordinarily do not consider the validity of a proposed amended pleading

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in deciding whether to grant leave to amend and defer consideration of challenges to

the merits of a proposed amendment until after leave to amend is granted and the

amended pleadings are filed. Netbula, LLC v. Distinct Corp., 212 F.R.D. 534, 539

(N.D. Cal. 2003) (citation omitted). 

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Because Rule15(a) favors a liberal policy, the nonmoving party bearsthe burden

of demonstrating why leave to amend should not be granted. Genentech, Inc. v. Abbott

Labs., 127 F.R.D. 529, 530-31 (N.D. Cal. 1989). In assessing the propriety of an

amendment, courts consider several factors: (1) undue delay, (2) bad faith or dilatory

motive; (3) repeated failure to cure deficiencies by amendments previously permitted;

(4) prejudice to the opposing party; and (5) futility of amendment. Foman, 371 U.S. at

182; United States v. Corinthian Colleges, 655 F.3d 984, 995 (9th Cir. 2011). These

factors are not equally weighted; the possibility of delay alone, for instance, cannot

justify denial of leave to amend, DCD Programs, 833 F.2d at 186, but when combined

with a showing of prejudice, bad faith, or futility of amendment, leave to amend will

likely be denied. Bowles v. Reade, 198 F.2d 752, 758 (9th Cir. 1999). The single most

important factor is whether prejudice would result to the non-movant as a consequence

of the amendment. William Inglis & Sons Baking Co. v. ITT Continental Baking Co.,

668 F.2d 1014, 1053 (9th Cir. 1981). 

Defendants do not assert that granting Plaintiff leave to file a second amendment

complaint to add a civil RICO claim would be futile, sought in bad faith, would create

undue delay or othewise prejudice Defendants. Accordingly, the Court GRANTS

Plaintiff’s motion for leave to file a second amended complaint to add civil RICO as

a cause of action. 

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B. Permissive Joinder

Plaintiff also seeks to join additional plaintiffs pursuant to Rule 20(a)(1) , based

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on newly discovered evidence. Defendant argues that permissive joinder is

inappropriate.

The Court notes that Defendants only argue they will be prejudiced if the Court

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were to allow the addition of two additional parties who live abroad as the cost of

discovery would increase exponentially. Since the Court DENIES Plaintiff’s motion

to add additional plaintiffs, Defendants’ argument is moot. 

The additional named plaintiffs are Ane Marie Lacy and Mark Carmelle 3

Chornohus. 

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Under Rule 20(a)(2), permissive joinder of defendants is proper if: “(A) any

right to relief is asserted against them jointly, severally, or in the alternative with

respect to or arising out of the same transaction, occurrence, or series of transactions

or occurrences; and (B) any question of law or fact common to all defendants will arise

in the action.” Fed. R. Civ. P. 20(a)(2). Rule 20(a)(2) is to be construed liberally to 

promote judicial economy and trial convenience. League to Save Lake Tahoe v. Tahoe

Regional Planning Agency, 558 F.2d 914, 917 (9th Cir. 1977) (citing Mosley v. Gen.

Motors, 497 F.2d 1330, 1332-33 (8thCir. 1974)). “The ‘same transaction’ requirement

of Rule 20 refers to ‘similarity in the factual background of a claim; claims that arise

out of a systematic pattern of events’ and have a ‘very definite logical relationship.’” 

Hubbard v. Hougland, No. 09-0939, 2010 WL 1416691, at *7 (E.D. Cal. Apr. 5, 2010)

(quoting Bautista v. Los Angeles County, 216 F.3d 837, 842-43 (9th Cir. 2000)). In

addition, “the mere fact that all [of a plaintiff’s] claims arise under the same general

law does not necessarily establish a common question of law or fact.” Coughlin v.

Rogers, 130 F.3d 1348, 1351 (9th Cir. 1997). 

However, “even once [the Rule 20(a)] requirements are met, a district court must

examine whether permissive joinder would ‘comport with the principles of

fundamental fairness’ or would result in prejudice to either side.” Coleman v. Quaker

Oats Company, 232 F.3d 1271, 1296 (9th Cir. 2000) (citing Desert Empire Bank v. 

Insurance Co. of North America, 623 F.2d 1371, 1375 (9th Cir. 1980). 

Here, Plaintiff seeks to add additional plaintiffs as they are victims to

Defendants’ fraudulent scheme. Besides stating that these additional plaintiffs are

victims, Plaintiff has failed to demonstrate that these additional plaintiffs seek relief

arising out of the same transaction and occurrence and that the same question of law

or fact is common to all plaintiffs. In fact, Plaintiff provides no facts to demonstrate

permissive joinder. As such, Plaintiff has failed to prove a definite logical relationship

between the claims of the additionally named plaintiffs and Plaintiff’s claim. 

Accordingly, the Court DENIES Plaintiff’s motion for leave to add two additional

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Plaintiffs. 

CONCLUSION

For the above stated reasons, the Court GRANTS Plaintiff’s Motion for Leave

to File a Second Amended Complaint to add a claim for Civil RICO. The Court

DENIES Plaintiff’s Motion for Leave to File a Second Amended Complaint to add

additional plaintiffs. Plaintiffshall file a second amended complaint within seven days

of the “Filed” date of the Order. Since Plaintiff will be filing a second amended

complaint, the Court DENIES Defendants’ motion to dismiss the first amended

complaint as moot. The hearing set for August 8, 2014 shall be vacated.

IT IS SO ORDERED. 

DATED: August 5, 2014

HON. GONZALO P. CURIEL

United States District Judge

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