DISCUSSION

The bankruptcy court did not abuse its discretion in denying leave to amend

on grounds of futility. A trial court does not abuse its discretion in denying leave

to amend where further amendment would be futile. See In re Tracht Gut, 836

F.3d at 1155. As noted, the bankruptcy court dismissed the FAC for failure to

state a claim and the BAP affirmed. Trustee does not propose factual allegations

in addition to those already pleaded in the deficient FAC to plausibly allege that

Blue Earth, Inc. (BEI) was insolvent under 11 U.S.C. § 548(a)(1)(B).

3 Trustee argues that BEI’s intangible assets were fraudulently overstated.

However, at the hearing on a motion to reconsider, Trustee could not assert

sufficient factual allegations to plead that liabilities exceeded assets on this basis.

Trustee also concedes that his first two complaints did not have specific

factual allegations because he did not know “the details of how overstated and

false the” financial statements were until learning about them from an SEC

complaint filed against BEI for financial fraud on June 28, 2019.

Trustee argues he was misled by the bankruptcy court’s statements during

the motion to dismiss on the initial complaint that left Trustee with the impression

that he only needed to make minor additions to the FAC. However, the

bankruptcy court also gave Trustee specific details on which complaint

paragraphs were deficient and stated that Trustee needed to allege more facts.

Despite notice that the FAC is still deficient, Trustee has not pleaded sufficient

factual allegations regarding unreasonably small capital to include in a second

amended complaint.

Trustee argues that the bankruptcy court erred when it failed to consider the

unreasonably small capital test in denying Trustee’s motion to reconsider.

However, Trustee never addressed the unreasonably small capital test in the

motion to reconsider and insufficiently addressed it in his complaints. It is a

plaintiff’s responsibility to sufficiently plead its own case. See Ashcroft v. Iqbal,

4 556 U.S. 662, 678 (2009).

Trustee also argues BEI was left with unreasonably small capital as

evidenced by the fact that it was forced to borrow funds from its shareholder,

Jackson Investment Group. However, the “ability to borrow money” to remain

operational for five months does not suggest insolvency. See Moody v. Sec. Pac.

Bus. Credit, Inc., 971 F.2d 1056, 1070, 1073 (3d Cir. 1992).

Trustee contends that he should be allowed to amend his complaint with

facts contained in the above-mentioned SEC complaint. However, these “facts

had been available to” Trustee. See Chodos v. W. Publ’g Co., 292 F.3d 992, 1003

(9th Cir. 2002). Trustee had access to pre-complaint discovery through Federal

Rule of Bankruptcy Procedure 2004 and had conducted depositions of Intracoastal

and issued requests for production. See In re Blue Earth, Inc., No. 16-30296

(Bankr. N.D. Cal. Mar. 21, 2016), ECF Nos. 303, 348, and 391. Trustee also had

access to BEI’s books and records throughout this litigation.

Trustee also argues that he only had one opportunity to amend the

complaint. However, there is no automatic right to amend a complaint a second

time. See, e.g., Curry v. Yelp Inc., 875 F.3d 1219, 1228 (9th Cir. 2017).

The judgment of the BAP as to leave to amend is REVERSED and the

bankruptcy court’s order denying leave to amend is AFFIRMED. We DENY the

motion for judicial notice of the SEC complaint as moot.

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