United States District Court, D. Arizona
Douglas L. Rayes, United States District Judge
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.
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.
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).
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.
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.
Futility of Common Law Claims
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).
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.