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Vegas Diamond Properties, LLC, A Nevada v. La Jolla Bank

February 28, 2012

VEGAS DIAMOND PROPERTIES, LLC, A NEVADA LIMITED LIABILITY COMPANY,
PLAINTIFF,
v.
LA JOLLA BANK, FSB, A CALIFORNIA CORPORATION; FEDERAL DEPOSIT INSURANCE CORPORATION, AS RECEIVER FOR LA JOLLA BANK; OMAR BENJAMIN WIGGINS, AN INDIVIDUAL; AND DOES I-X, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Hayes, Judge:

ORDER

The matter before the Court is the Motion to Dismiss First Amended Complaint filed by Defendant Federal Deposit Insurance Corporation ("FDIC") as Receiver for La Jolla Bank, FSB ("La Jolla Bank"). (ECF No. 97).

BACKGROUND

On January 8, 2010, Plaintiffs Vegas Diamond Properties, LLC ("Vegas Diamond") and Johnson Investments, LLC ("Johnson Investments") initiated this action by filing a Complaint in Nevada state court against La Jolla Bank and Action Foreclosure Services ("Action Foreclosure"). (Ex. A, ECF No. 1-2). On January 13, 2010, Defendants removed the action to the United States District Court for the District of Nevada. (ECF No. 1).

On April 21, 2010, the FDIC filed a motion to substitute the FDIC as receiver for La Jolla Bank and to change venue to the Southern District of California. (ECF No. 15). In May 2010, the claims contained in Plaintiff's complaint were submitted to the FDIC as part of the mandatory administrative review process required under the Financial Institution Reform, Regulation and Enforcement Act ("FIRREA"). (Decl. Douglas Heumann; ECF No. 97-2 ¶ 2). The FDIC disallowed the claims. On June 3, 2010, the FDIC was substituted as receiver for La Jolla Bank, and the action was transferred to this Court. (ECF No. 24).

On July 14, 2011, Plaintiffs filed a First Amended Complaint ("the Complaint") against Defendants La Jolla Bank, the FDIC as receiver for La Jolla Bank, Action Foreclosure, Omar Wiggins, Rick Hall, Martin Rodriguez, Frank Warren, R.W. Loveless, and Lynn Hein. (ECF No. 94). The amended complaint alleged four new causes of action not contained in the original complaint. The four new causes of action were not submitted to the FDIC for administrative review under FIRREA. (ECF No. 97-2 ¶ 2).

On July 28, 2011, Defendant FDIC filed a Motion to Dismiss the Complaint. (ECF No. 97). On August 15, 2011, Plaintiffs filed an opposition. (ECF No. 98). On August 22, 2011, Defendant FDIC filed a reply. (ECF No. 102).

On November 9, 2011, Defendant FDIC filed a Motion to File Documents Under Seal in connection with their anticipated motion for summary judgment. (ECF No. 113). On November 21, 2011, Defendant FDIC filed a Motion for Summary Judgment. (ECF No. 115). On December 27, 2011, Plaintiffs filed an opposition. (ECF No. 126). On January 3, 2012, Defendant FDIC filed a reply. (ECF No. 128).

On December 14, 2011, Defendant Frank Warren was dismissed from the case because Plaintiffs did not oppose his motion to dismiss. (ECF No. 124). On January 5, 2012, the claims of Plaintiff Johnson Investments were dismissed because Johnson Investments failed to substitute counsel in compliance with Civil Local Rule 83.3. (ECF No. 130). On February 9, 2012, Defendants Action Foreclosure, Rick Hall, Martin Rodriguez, R.W. Loveless, and Lynn Hein were dismissed because Plaintiff failed to serve those defendants. (ECF No. 136).

ALLEGATIONS OF THE COMPLAINT

In 2001 or 2002, Robert Dyson, Jr., an owner of various real estate businesses, began investing in a real estate development in Anza, California ("Anza Project"). (ECF No. 94 ¶¶ 44-48). Dyson had a pre-existing financial relationship with La Jolla Bank that included personal relationships with La Jolla Bank owners and officers including Frank Warren, Rich Hall, Martin Rodriguez, R.W. Loveless, and Lynn Hein. Id. ¶¶ 36-43. La Jolla Bank made a number of loans to Dyson, and Dyson attended weekly meetings and events at La Jolla Bank. Id. ¶¶ 31-41. Dyson approached La Jolla Bank to obtain loans for the Anza Project, but La Jolla Bank officials told Dyson that he needed to find an investor or equity partner to meet "equity requirements" before La Jolla Bank would lend him funds for the project. Id. ¶ 49.

Dyson approached Doug Johnson, a principal of Johnson Investments, who agreed to help Dyson obtain funds for the Anza Project using Johnson Investments' properties ("Johnson Properties") as collateral. Id. ¶¶ 50-55. In 2005, Dyson arranged for Johnson to take a loan from Community National Bank in the amount of approximately $7.5 million secured by Johnson Properties. Id. ¶ 56. The loan to Johnson was for two years with 7% interest-only payments and the full balance due at the end of the two year period. Id. ¶ 57. Johnson loaned the Community National Bank loan proceeds to Dyson at 12% interest-only payments for two years, with the full balance due at the end of the two year period. Dyson provided no security for this loan. Id. ¶ 58. Using the loan proceeds from Johnson, Dyson was able to obtain additional funds from La Jolla Bank for the Anza Project. Id. ¶ 62.

Prior to obtaining the loan from Johnson, Dyson had encountered "severe resistance and trouble in proceeding with the Anza Project," including community fighting over the project, resistance from local Native American tribes, water rights disputes, and delays in the mapping process. Id. ¶ 63. As a lender to Dyson for the Anza Project, La Jolla Bank was aware of these adverse issues and delays. Id. ¶ 64. Dyson never informed Johnson of the problems with the project, which persisted through the two year loan period. Id. ¶¶ 67-69. At the end of the loan period, Dyson was unable to pay off the balance of the loan to Johnson. Id. ¶ 66.

In lieu of paying off the loan to Johnson, Dyson brought La Jolla Bank, various Bank officers, and Dyson's accountant Omar Wiggins into the transaction, structuring a new loan to Johnson with which to pay off the Community National Bank loan and to make additional ...


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