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Crossfirst Bank v. Vieste SPE LLC

United States District Court, D. Arizona

September 30, 2019

Crossfirst Bank, et al., Plaintiffs,
Vieste SPE LLC, et al., Defendants.


          Douglas L. Rayes, United States District Judge

         Plaintiffs bring this putative class action relating to their purchase of $28, 935, 000 in industrial development bonds (“Bonds”) described in Defendants' Official Statement (“OS”) dated April 17, 2013. The relevant factual background can be found in the Court's December 18, 2018 order, in which the Court dismissed Plaintiffs' Arizona Securities Act (“ASA”) claims but allowed them to file a motion for leave to amend.

         Before the Court is Plaintiffs' motion for leave to file a second amended complaint (“SAC”) (Doc. 89), which is fully briefed (Docs. 100-104, 110). For the following reasons, the motion is granted.[1]

         I. Legal Standard

         Leave to amend should be given freely “when justice so requires.” Fed.R.Civ.P. 15(a)(2). When assessing the propriety of a motion for leave to amend, the court considers factors such as: “(1) bad faith, (2) undue delay, (3) prejudice to the opposing party, (4) futility of amendment; and (5) whether plaintiff has previously amended his complaint.” Allen v. City of Beverly Hills, 911 F.2d 367, 373 (9th Cir. 1990). “Generally, this determination should be performed with all inferences in favor of granting the motion.” Griggs v. Pace Am. Grp., Inc., 170 F.3d 877, 880 (9th Cir. 1999).

         II. Discussion

         Plaintiffs filed their SAC in accordance with the Court's prior order. The Court finds no evidence that leave is sought in bad faith or that further amendment would unduly prejudice Defendants. Defendants instead argue that the proposed amendments are futile and unduly delayed.

         A. ASA Claims

         Plaintiffs' proposed SAC includes the previously dismissed ASA claims. Plaintiffs do not allege new facts that change the Court's previous determination that the ASA claims are time-barred, nor have Plaintiffs properly sought reconsideration of that prior order. However, “it is the law of this circuit that a plaintiff waives all claims in the alleged dismissed complaint which are not realleged in an amended complaint . . . If a plaintiff fails to include dismissed claims in an amended complaint, the plaintiff is deemed to have waived any error in the ruling dismissing the prior complaint.” Lacey v. Maricopa Cty., 693 F.3d 896, 925 (9th Cir. 2012) (internal citation omitted). Accordingly, although Plaintiffs will not be permitted to proceed with the ASA claims, the Court will not strike the allegations from the SAC because Plaintiffs must include them to preserve rights on appeal.

         B. Futility of Common Law Claims

          1. Fraud

         Defendants argue that Plaintiffs' proposed fraud claim is futile because it is barred by the three-year statute of limitations. A.R.S. § 12-543(3). The Court disagrees. Plaintiffs fraud claim arises from Defendants' production of the OS and the alleged misstatements and omissions contained therein. These allegations also were the basis for Plaintiffs' ASA claims. In its prior order, the Court determined that Plaintiffs were on notice of possible misstatements and omissions in the OS by no later than July 24, 2015. By then, Plaintiffs would have known enough to investigate the alleged fraud. Plaintiffs filed this action within three years of that time, and the allegations in their proposed SAC relate back to that initial filing. See Fed. R. Civ. P. 15(c)(1)(B).

         Defendants also argue that Plaintiffs have not plead fraud with the requisite specificity. See Fed. R. Civ. P. 9(b). For purposes of granting leave to amend, the Court finds Plaintiffs have pled fraud with enough specificity. Plaintiffs claim that Vieste and the Underwriters “participated in the preparation of the Official Statement by reviewing it, commenting on it, and contributing information to it prior to its issuance.” (Doc. 89-1 at ¶¶ 203-14.) Plaintiffs allege that “[s]tatements in the Official Statement concerning the viability of the MRF Project and the degree of risk for the Bonds were false, as alleged above.” (Id. at 36) (emphasis added). The “above” statements are factual allegations concerning various specific misstatements and omissions allegedly made by Defendants. These include, for example, that “[c]ontrary to [OS statements] Phase 1 had not been designed at the time the Official Statement was issued . . .” and “[c]ontrary to the representations in the Official Statement, only once Phase 2 was constructed and a power purchaser was identified could the combined facility be successful. The Official Statement omits these facts.” (Id. at 16-17). Many other allegations contained in pages 11 through 30 of the proposed SAC provide enough detail about the facts and circumstances constituting the alleged fraud, and Plaintiffs have sufficiently identified the roles of Defendants in the fraudulent scheme. Amendment therefore would not be futile.

         2. Aiding ...

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