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SASA Investment Holdings, LLC v. Chhatrala

United States District Court, S.D. California

October 31, 2019

SASA INVESTMENT HOLDINGS, LLC, a Florida limited liability company, SANJAY MADAN; and ANJLI MADAN, Plaintiffs,
HEMANT CHHATRALA; JENISH PATEL; TRAV-COR & INVESTMENTS, INC., a California corporation; ORANGE COAST TITLE COMPANY, a California Corporation; BANK OF AMERICA, N.A.; CHHATRALA INVESTMENTS, LLC a California limited partnership; JSAKGP, INC., a California corporation; PRAGATI INVESTMENTS, LLC, a California limited liability company; and SHIVA MANAGEMENT, INC., a California corporation, Defendants.



         Pending before the Court are motions to dismiss filed by Defendant Orange Coast Title Company (“OCTC”), Defendant Pragati Investment, LLC (“Pragati”), and Defendant Bank of America, N.A. (“BOA”). Plaintiffs SASA Investment Holdings, LLC, Sanjay Madan and Anjli Madan oppose all three motions.

         The Court decides these matters on the papers submitted and without oral argument. See Civil L. R. 7.1(d.1). As an initial matter, the Court GRANTS Plaintiffs' request for an extension of time to oppose BOA's motion [Doc. 30] and, therefore, deems Plaintiffs' opposition to BOA's motion as timely filed. For the reasons stated below, the Court GRANTS Defendants' motions [Docs. 7, 8, 29].

         I. Background

         In October 2013, Plaintiff Sanjay Madan met with Bhavesh Patel[1], a managing member of a Florida limited liability company. (Compl. ¶ 12.) Based on B. Patel's advice, Madan, Plaintiff Anjili Madan, and Plaintiff SASA Investment Holdings, LLC (“SASA”) paid $450, 000 to Defendant Chhatrala, LLC, for a membership interest in Chhatrala, LLC, Chhatrala Opportunity Fund, and Waterfall Properties, LLC. (Id. ¶¶ 13- 14.) Thereafter, in January 2014, Chhatrala, LLC and SASA entered a Membership Interest Purchase agreement, whereby SASA paid Chhatrala $200, 000 for a 5% membership interest in Defendant JSAK. (Id. ¶¶ 15-16.)

         Plaintiffs did not receive executed copies of the Partnership Agreement, any amendments made to the agreement, or the Membership Interest Agreement. (Compl. ¶ 18.) Nor did they receive any information regarding how or where their funds were being invested. (Id. ¶ 19.) Madan, therefore, reached out to B. Patel and Defendant Jenish Patel (who claimed to be a Chhatrala, LLC representative) numerous times to obtain copies of the agreements but received no response. (Id. ¶¶ 20-24.) Accordingly, in order to find out what happened to their investment, Plaintiffs filed a petition for pre-suit discovery. (Id. ¶ 28.) The petition was granted, and Plaintiff's counsel took depositions and requested documents from Chhatrala, LLC, its partners, investors, and related entities. (Id. ¶ 29.)

         Plaintiffs discovered B. Patel had invested their funds in non-existent partnerships and placed the funds in a bank account at Mega Bank, which was controlled by J. Patel although he had no authority to use Plaintiffs' funds. (Compl. ¶ 31.) Plaintiffs further allege that J. Patel's fraudulent transactions were “handled” by Defendants Trav-Cor & Investments, Inc. (Trav-Cor), OCTC and BOA. (Id. ¶ 34.)

         On December 4, 2018, Plaintiffs filed this lawsuit against nine defendants. The Complaint lists three causes of action: fraud and conversion against J. Patel, and accounting presumably against all defendants.[2] (Compl. ¶¶ 36-50.) Defendants OCTC, BOA, and Pragati have all filed motions to dismiss under Federal Rule of Procedure 12(b)(6) asserting the same argument: (1) they have no relationship with Plaintiffs that would require an accounting; and (2) they do not owe Plaintiffs money. (OCTC MTD [Doc. 7-1] 3:25-28; BOA MTD [Doc. 29] 3:25-28; Pragati MTD [8-1] 5:7-8, 23-25).

         II. Legal Standard

         A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the complaint's sufficiency. See North Star Int'l. v. Arizona Corp. Comm'n., 720 F.2d 578, 581 (9th Cir. 1983). Dismissal of a claim according to this rule is proper only in “extraordinary” cases. United States v. Redwood City, 640 F.2d 963, 966 (9th Cir. 1981). A complaint may be dismissed as a matter of law for two reasons: (1) lack of a cognizable legal theory, or (2) insufficient facts under a cognizable theory. Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984).

         As the Supreme Court explained, “[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the ‘grounds' of his ‘entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Rather, the allegations in the complaint “must be enough to raise a right to relief above the speculative level.” Id. Additionally, all material allegations in the complaint, “even if doubtful in fact, ” are assumed to be true. Id. The court must assume the truth of all factual allegations and must “construe them in the light most favorable to the nonmoving party.” Gompper v. VISX, Inc., 298 F.3d 893, 895 (9th Cir. 2002). The complaint and all reasonable inferences therefrom are construed in the plaintiff's favor. Walleri v. Fed. Home Loan Bank of Seattle, 83 F.3d 1575, 1580 (9th Cir. 1996). Nevertheless, conclusory legal allegations and unwarranted inferences are insufficient to defeat a motion to dismiss. Ove v. Gwinn, 264 F.3d 817, 821 (9th Cir. 2001).

         III. Discussion

         Defendants OCTC, BOA, and Pragati argue the Complaint fails to state an accounting cause of action. The Court agrees.

         A cause of action for an accounting is a proceeding in equity whereby the court adjudicates the amount due to the plaintiff. See Fredianelli v. Jenkins, 931 F.Supp.2d 1001, 1025 (N.D. Cal. 2013) (quoting Verdier v. Super. Ct. in and for City & Cty of S.F., 88 Cal.App. 2d 572, 530 (1948). An action for an accounting is appropriate when (1) there is a relationship between the plaintiff and defendant that requires an accounting, or (2) the “accounts are so complicated that an ordinary legal action demanding a fixed sum is impracticable, ” and there is some balance due to the plaintiff that can “only be ascertained by an accounting.” See Teselle v. McLoughlin, 173 Cal.App.4th 156, 179 (2009); Quinteros v. Aurora Loan Servs., 740 F.Supp.2d 1163, 1170 (E.D. Cal. 2010). Additionally, there is no right to an accounting if ...

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