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Gauba v. Florence Hospital, LLC

United States District Court, Ninth Circuit

June 19, 2013

Dinesh Gauba, Plaintiff,
Florence Hospital, LLC, an Arizona Limited Liability Company; Edward McEachern, as an individual, Defendants.


DAVID G. CAMPBELL, District Judge.

Before the Court is the motion to dismiss filed by Defendant Edward McEachern. Doc. 16. The motion is fully briefed. Doc. 17, 18. No party has requested oral argument. For the reasons that follow, the Court will deny the motion.

I. Background.

Plaintiff Dinish Gauba loaned Defendant Florence Hospital, LLC $250, 000 pursuant to a Loan Agreement and Promissory Note (the "loan agreement") executed by McEachern on behalf of Florence Hospital on May 17, 2012. Doc. 15 at ¶¶ 11-12. In consideration for the loan, Florence Hospital and McEachern agreed to repay the $250, 000 plus additional fees in the amount of $62, 500, on or before May 25, 2012. Id. at ¶¶ 15-16. The loan agreement states that it "is entered into between: BORROWER: FLORENCE, HOSPITAL, LLC, ... and LENDER: Dinesh Gauba." Doc. 15-1 at 2. The loan agreement provides that Florence Hospital "shall be in default if the entire indebtedness amount is not paid by 5/25/2012." Id. The agreement also provides that "Borrower's Chairman of the Board, Edward McEachern, MD, will personally guarantee loan for the term of the note in its principal sum of $250, 000, additional fees of $62, 500, and fees incurred upon the event of Default." Id. The loan agreement is signed "FLORENCE HOSPITAL, LLC, By: Edward McEachern, Manager." Id at 3.

Plaintiff wire transferred $250, 000 to Florence Hospital on May 17, 2012. Doc 15 at ¶ 15. Florence Hospital and McEachern failed to repay the loan by May 25, 2012. Id. at ¶ 17. McEachern sent an email to Plaintiff on July 27, 2012, admitting a personal obligation to make payments on the loan. Id. at ¶ 22. Plaintiff's First Amended Complaint ("FAC") alleges a breach of contract claim against Florence Hospital and McEachern, and fraud and promissory estoppel claims against McEachern. Id. at 4-7.

II. Legal Standard.

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 they 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 B but it has not show[n]' B that the pleader is entitled to relief.'" Id. at 679 (quoting Fed.R.Civ.P. 8(a)(2)).

Generally, the Court will not consider evidence or documents beyond the pleadings when ruling on a Rule 12(b)(6) motion. Fed.R.Civ.P. 12(d); see also Hal Roach Studios, Inc. v. Richard Feiner and Co., Inc., 896 F.2d 1542, 1555 n. 19 (9th Cir. 1989). "[M]aterial which is properly submitted as part of the complaint may be considered, " Hal Roach Studios, 896 F.2d at 1555 n. 19, and "a document is not outside' the complaint if the complaint specifically refers to the document and its authenticity is not questioned, " Branch v. Tunnell, 14 F.3d 449, 453 (9th Cir. 1994) ( overruled on other grounds by Galbraith v. Cnty. of Santa Clara, 307 F.3d 1119 (9th Cir. 2002)). Because the loan agreement was attached to the complaint (Doc. 15-1 at 1-3), the Court will consider it in ruling on McEachern's motion.

III. Plaintiff's Objection.

Plaintiff's objection, which the Court construes as a motion to strike, requests that Defendant's reply (Doc. 18) be struck as untimely. Doc. 19 at 1. Plaintiff's response to the motion to dismiss was filed on April 16, 2013. Doc. 20 at 1. McEachern's reply was filed ten days later on April 26, 2013. Id. Plaintiff argues that Arizona Local Rule 7.2(d) allows only seven days for a reply memoranda to be filed, but Plaintiff fails to account for Rule 6(d) of the Federal Rules of Civil Procedure, which allow for three extra days to file a reply memoranda under Rule 5(b)(2)(e). The reply was timely.

IV. McEachern's Motion.

A. Breach of Contract.

The loan agreement between Plaintiff and Florence Hospital was signed by McEachern as an agent to the Hospital. Doc. 15-1 at 3. The agreement was not signed by McEachern in his personal capacity. Id. The Arizona statute of frauds provides that "[n]o action shall be brought in any court" to enforce a contract "[t]o charge a person upon a promise to answer for the debt... of another" unless the contract "is in writing and signed by the party to be charged." A.R.S. § 44-101(2). Plaintiff argues that the primary purpose exception to the statute of frauds should apply. Doc. 17 at 5.

McEachern argues that the primary purpose exception does not apply because the primary purpose of the loan was not for his benefit. Doc. 16 at 6. The primary purpose exception provides that "[w]hen the main purpose of the promisor is not to answer for the debt of another, but to obtain a substantial benefit to himself, which he actually secures as the consideration for his promise, then not only is the promise valid though oral, it is supported by good and sufficient consideration." Yarbro v. Neil B. McGinnis Equip. Co., 420 P.2d 163, 167 (Ariz. 1966). The benefit ...

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