1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 Case No.: 18-CV-2735 W (BGS)

SASA INVESTMENT HOLDINGS,

12 LLC, a Florida limited liability ORDER GRANTING: 13 company, SANJAY MADAN; and (1) PLAINTIFFS’ MOTION FOR AN

ANJLI MADAN, EXTENSION OF TIME TO FILE

14 Plaintiffs, OPPOSITION [DOC. 30], AND 15 (2) DEFENDANTS’ MOTIONS TO v. DISMISS THE COMPLAINT [DOC. 16 7, 8, 29]

HEMANT CHHATRALA; JENISH

17

PATEL; TRAV-COR &

18 INVESTMENTS, INC., a California corporation; ORANGE COAST TITLE 19 COMPANY, a California Corporation; 20 BANK OF AMERICA, N.A.;

CHHATRALA INVESTMENTS, LLC

21 a California limited partnership; 22 JSAKGP, INC., a California corporation; PRAGATI 23 INVESTMENTS, LLC, a California 24 limited liability company; and SHIVA MANAGEMENT, INC., a California 25 corporation, 26 Defendants. 27 Pending before the Court are motions to dismiss filed by Defendant Orange Coast 28 Title Company (“OCTC”), Defendant Pragati Investment, LLC (“Pragati”), and 1 Defendant Bank of America, N.A. (“BOA”). Plaintiffs SASA Investment Holdings, 2 LLC, Sanjay Madan and Anjli Madan oppose all three motions. 3 The Court decides these matters on the papers submitted and without oral 4 argument. See Civil L. R. 7.1(d.1). As an initial matter, the Court GRANTS Plaintiffs’ 5 request for an extension of time to oppose BOA’s motion [Doc. 30] and, therefore, deems 6 Plaintiffs’ opposition to BOA’s motion as timely filed. For the reasons stated below, the 7 Court GRANTS Defendants’ motions [Docs. 7, 8, 29]. 8 9 I. BACKGROUND 10 In October 2013, Plaintiff Sanjay Madan met with Bhavesh Patel1, a managing 11 member of a Florida limited liability company. (Compl. ¶ 12.) Based on B. Patel’s 12 advice, Madan, Plaintiff Anjili Madan, and Plaintiff SASA Investment Holdings, LLC 13 (“SASA”) paid $450,000 to Defendant Chhatrala, LLC, for a membership interest in 14 Chhatrala, LLC, Chhatrala Opportunity Fund, and Waterfall Properties, LLC. (Id. ¶¶ 13– 15 14.) Thereafter, in January 2014, Chhatrala, LLC and SASA entered a Membership 16 Interest Purchase agreement, whereby SASA paid Chhatrala $200,000 for a 5% 17 membership interest in Defendant JSAK. (Id. ¶¶ 15–16.) 18 Plaintiffs did not receive executed copies of the Partnership Agreement, any 19 amendments made to the agreement, or the Membership Interest Agreement. (Compl. ¶ 20 18.) Nor did they receive any information regarding how or where their funds were being 21 invested. (Id. ¶ 19.) Madan, therefore, reached out to B. Patel and Defendant Jenish 22 Patel (who claimed to be a Chhatrala, LLC representative) numerous times to obtain 23 copies of the agreements but received no response. (Id. ¶¶ 20–24.) Accordingly, in 24 order to find out what happened to their investment, Plaintiffs filed a petition for pre-suit 25 discovery. (Id. ¶ 28.) The petition was granted, and Plaintiff’s counsel took depositions 26 27 28 1 and requested documents from Chhatrala, LLC, its partners, investors, and related 2 entities. (Id. ¶ 29.) 3 Plaintiffs discovered B. Patel had invested their funds in non-existent partnerships 4 and placed the funds in a bank account at Mega Bank, which was controlled by J. Patel 5 although he had no authority to use Plaintiffs’ funds. (Compl. ¶ 31.) Plaintiffs further 6 allege that J. Patel’s fraudulent transactions were “handled” by Defendants Trav-Cor & 7 Investments, Inc. (Trav-Cor), OCTC and BOA. (Id. ¶ 34.) 8 On December 4, 2018, Plaintiffs filed this lawsuit against nine defendants. The 9 Complaint lists three causes of action: fraud and conversion against J. Patel, and 10 accounting presumably against all defendants.2 (Compl. ¶¶ 36–50.) Defendants OCTC, 11 BOA, and Pragati have all filed motions to dismiss under Federal Rule of Procedure 12 12(b)(6) asserting the same argument: (1) they have no relationship with Plaintiffs that 13 would require an accounting; and (2) they do not owe Plaintiffs money. (OCTC MTD 14 [Doc. 7-1] 3:25–28; BOA MTD [Doc. 29] 3:25–28; Pragati MTD [8-1] 5:7–8,23–25). 15 16 II. LEGAL STANDARD 17 A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the 18 complaint’s sufficiency. See North Star Int’l. v. Arizona Corp. Comm’n., 720 F.2d 578, 19 581 (9th Cir. 1983). Dismissal of a claim according to this rule is proper only in 20 “extraordinary” cases. United States v. Redwood City, 640 F.2d 963, 966 (9th Cir. 21 1981). A complaint may be dismissed as a matter of law for two reasons: (1) lack of a 22 cognizable legal theory, or (2) insufficient facts under a cognizable theory. Robertson v. 23 Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984). 24

25 26 2 Page one of the Complaint lists nine defendants: H. Chhatrala, J. Patel, OCTC, BOA, Chhatrala, LLC, JSAK, Pragati, and Shiva. However, JSAK, Pragati, and Shiva are not listed under any cause of action. 27 The Court assumes for purposes of this motion that Pragati was meant to be included in the accounting 28 cause of action. 1 As the Supreme Court explained, “[w]hile a complaint attacked by a Rule 12(b)(6) 2 motion to dismiss does not need detailed factual allegations, a plaintiff’s obligation to 3 provide the ‘grounds’ of his ‘entitlement to relief’ requires more than labels and 4 conclusions, and a formulaic recitation of the elements of a cause of action will not do.” 5 Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Rather, the allegations in the 6 complaint “must be enough to raise a right to relief above the speculative level.” Id. 7 Additionally, all material allegations in the complaint, “even if doubtful in fact,” are 8 assumed to be true. Id. The court must assume the truth of all factual allegations and 9 must “construe them in the light most favorable to the nonmoving party.” Gompper v. 10 VISX, Inc., 298 F.3d 893, 895 (9th Cir. 2002). The complaint and all reasonable 11 inferences therefrom are construed in the plaintiff’s favor. Walleri v. Fed. Home Loan 12 Bank of Seattle, 83 F.3d 1575, 1580 (9th Cir. 1996). Nevertheless, conclusory legal 13 allegations and unwarranted inferences are insufficient to defeat a motion to dismiss. 14 Ove v. Gwinn, 264 F.3d 817, 821 (9th Cir. 2001). 15 16 III. DISCUSSION 17 Defendants OCTC, BOA, and Pragati argue the Complaint fails to state an 18 accounting cause of action. The Court agrees. 19 A cause of action for an accounting is a proceeding in equity whereby the court 20 adjudicates the amount due to the plaintiff. See Fredianelli v. Jenkins, 931 F.Supp. 2d 21 1001, 1025 (N.D. Cal. 2013) (quoting Verdier v. Super. Ct. in and for City & Cty of S.F., 22 88 Cal. App. 2d 572, 530 (1948). An action for an accounting is appropriate when (1) 23 there is a relationship between the plaintiff and defendant that requires an accounting, or 24 (2) the “accounts are so complicated that an ordinary legal action demanding a fixed sum 25 is impracticable,” and there is some balance due to the plaintiff that can “only be 26 ascertained by an accounting.” See Teselle v. McLoughlin, 173 Cal. App. 4th 156, 179 27 (2009); Quinteros v. Aurora Loan Servs., 740 F.Supp. 2d 1163, 1170 (E.D. Cal. 2010). 28 Additionally, there is no right to an accounting if there is no misconduct by the 1 defendant. Union Bank v. Super. Ct. of L.A., 31 Cal. App. 4th 573, 593–594 (1995) 2 (finding no right to a cause of action because plaintiff admitted the defendant did not 3 engage in misconduct). 4 Plaintiffs do not plead sufficient facts to establish any misconduct by OCTC, BOA, 5 or Pragati.3 As to OCTC and BOA, the Complaint alleges that they “handled” J. Patel’s 6 fraudulent transactions, and that they “knew or should have known [J. Patel] had no 7 authority to act on behalf of JSAK or the Chhatrala Corporations.” (Compl. ¶¶ 34, 35.) 8 These vague and conclusory statements do not provide sufficient information notifying 9 OCTC or BOA what they are alleged to have done wrong. For example, the allegations 10 fall well short of suggesting that OCTC or BOA were collaborating with J. Patel and 11 there are no other factual allegations indicating how OCTC or BOA should have known 12 J. Patel was engaging in misconduct. Nor is it clear what Plaintiffs mean by the 13 allegation that OCTC and BOA “handled” the fraudulent transactions. With respect to 14 Pragati, the Complaint has no information about how it was involved in any transactions 15 or misconduct. As Pragati points out in its motion, the body of the Complaint contains no 16 allegations against it, and it is not identified in the heading of Plaintiffs’ accounting cause 17 of action. (Pragati MTD 3:11–13; Compl. 3:1–3). Because there is no right to an 18 accounting if there is no misconduct, Defendants are entitled to dismissal. 19 The Complaint also does not plead sufficient facts to establish there is a 20 relationship between Plaintiffs and OCTC, BOA or Pragati that would require an 21 accounting. Instead, the Complaint alleges in conclusory terms: “There exists a 22 relationship between Plaintiffs and each of the Defendants that requires an accounting.” 23 (Compl. ¶ 48.) This allegation is insufficient. See Ove, 264 F.3d at 821. 24 25 3 Relying on Union Bank, Defendants argue they should be dismissed because they do not owe Plaintiffs 26 money. But the reason Union Bank concluded that no money was owed was because “plaintiffs admitted . . . defendant did nothing wrong . . . .” Id., 31 Cal.App.4th at 594. Here, Plaintiffs allege in the 27 accounting cause of action that “some balance is due to Plaintiffs” and thus arguably allege Defendants owe them money. (Compl. ¶ 49.) Similar to Union Bank, however, the reason this allegation is 28 1 In their opposition, Plaintiffs insist there is a relationship between them and each 2 || of the three Defendants that would require an accounting. However, Plaintiffs rely on 3 || facts not alleged in the Complaint. (Opp ’n. to OCTC MTD [Doc. 15] 2:20; Opp’n to 4 ||BOA MTD [Doc. 31] 2:19-21; Opp’n to Pragati MTD (Doc. 21] 5:11-14). Because 5 || Defendants challenge is to the Complaint as currently pled, Plaintiffs’ reliance on those 6 || facts is unavailing. + 7 However, Plaintiffs alternatively request leave to amend. Because Plaintiffs have 8 ||not been given leave to amend in this case, and Defendants have not shown that leave to 9 ||amend would be futile, the Court will grant Plaintiffs’ request. 10 11 CONCLUSION & ORDER 12 The Court GRANTS Plaintiffs’ request for an extension of time to oppose BOA’s 13 motion [Doc. 30] and, therefore, Plaintiffs’ opposition to BOA’s motion as deemed 14 |/timely filed. In light of the foregoing, the Court GRANTS Defendants’ motions to 15 || dismiss [Docs. 7, 8,29] WITH LEAVE TO AMEND. Plaintiffs’ first amended 16 ||}complaint, if any, must be filed on or before November 13, 2019. 17 IT IS SO ORDERED. 18 Dated: October 31, 2019 \ 19 fish ue Lerr 20 Hn. 1 omas J. Whelan 1 United States District Judge 22 23 24 |; ___ SSS 25 * The Court recognizes another potential issue with the Complaint. An accounting is not available if the 26 || “plaintiff alleges the right to recover a sum certain or a sum that can be made certain by calculation.” Teselle, 173 Cal.App.4th at 179. Plaintiffs allege in their Complaint that they paid Chhatrala $450,000 27 on October 1, 2013, and $200,000 on January 29, 2014, for a total of $650,000. (Compl. 49 14,16.) This 28 || appears to establish the right to recover a sum certain. However, because none of the parties address this argument in detail, the Court declines to rule on the issue.

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