Joseph Schwartz v. Nicholas Finn ( 2022 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS MAR 4 2022
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
JOSEPH SCHWARTZ; et al., No. 21-15841
Plaintiffs-Appellants, D.C. No. 3:20-cv-02044-SK
v.
MEMORANDUM*
NICHOLAS FINN; et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of California
Sallie Kim, Magistrate Judge, Presiding
Argued and Submitted February 17, 2022
San Francisco, California
Before: McKEOWN and W. FLETCHER, Circuit Judges, and BENNETT,**
District Judge.
This case involves untimely allegations of fraud and misrepresentation against
a nationwide proprietor of nursing homes. The instant appeal arises from the district
court’s dismissal of Appellants’ Second Amended Complaint for failure to plausibly
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The Honorable Richard D. Bennett, United States District Judge for
the District of Maryland, sitting by designation.
plead the application of the discovery rule in order to toll the statute of limitations.
We have jurisdiction under 28 U.S.C. § 1291, and now affirm.
According to the allegations in the Second Amended Complaint, Defendants-
Appellees fraudulently misrepresented their finances to induce Plaintiffs-Appellants
to acquire the operations portions of 61 nursing facilities in four states, and to enter
lease agreements with the entities that would be the landlords and tenants in those
facilities. The last of these Lease Agreements was finalized on February 1, 2017.
Appellants filed suit on March 24, 2020—about two months outside the three-year
limitations period for fraud, and more than a year outside the two-year period for
negligent misrepresentation. See Cal. Civ. Proc. Code § 338(d); E-Fab, Inc. v.
Accts., Inc. Servs., 64 Cal. Rptr. 3d 9, 14 (Cal. Ct. App. 2007) (citing Cal. Civ. Proc.
Code § 339). The district court dismissed the Second Amended Complaint with
prejudice, concluding that the Appellants’ claim was time-barred, and that they
failed to plead application of the discovery rule under California law.
We review a district court’s ruling on a motion to dismiss de novo, applying
the same standard of review as the district court. Bafford v. Northrop Grumman
Corp., 994 F.3d 1020, 1025 (9th Cir. 2021). In evaluating a motion to dismiss, a
court must “accept all factual allegations in the complaint as true and construe the
pleadings in the light most favorable to the nonmoving party.” Id. To survive a
motion to dismiss for failure to state a claim, the complaint must “contain enough
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facts to ‘state a claim for relief that is plausible on its face.’” Plaskett v. Wormuth,
18 F.4th 1072, 1083 (9th Cir. 2021) (quoting Hebbe v. Pliler, 627 F.3d 338, 341–42
(9th Cir. 2010)).
Under California law, a cause of action accrues “upon the occurrence of the
last element essential to the cause of action.” Apr. Enters., Inc. v. KTTV &
Metromedia, Inc., 195 Cal. Rptr. 421, 432 (Cal. Ct. App. 1983); Magpali v. Farmers
Grp., Inc., 55 Cal. Rptr. 2d 255, 233 (Cal. Ct. App. 1996). “The discovery rule
‘postpones accrual of a cause of action until the plaintiff discovers, or has reason to
discover, the cause of action.’” E-Fab, Inc., 64 Cal. Rptr. 3d at 15 (quoting Norgart,
981 P.2d at 83). To plead the applicability of the discovery rule at the motion to
dismiss stage, the plaintiff must allege: “(1) the time and manner of discovery and
(2) the inability to have made earlier discovery despite reasonable diligence.” Chubb
Custom Ins. Co. v. Space Sys./Loral, Inc., 710 F.3d 946, 975 (9th Cir. 2013) (quoting
Camsi IV v. Hunter Tech. Corp., 282 Cal. Rptr. 80, 86 (Cal. App. 1991)).
The Appellants fail to make this showing. To survive a motion to dismiss,
“plaintiffs must include sufficient ‘factual enhancement’ to cross ‘the line between
possibility and plausibility.’” Eclectic Props. E., LLC v. Marcus & Millichap Co.,
751 F.3d 990, 995 (9th Cir. 2014) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 557 (2007)). “Threadbare recitals of the elements of a cause of action, supported
by mere conclusory statements, do not suffice.” Wormuth, 18 F.4th at 1083 (quoting
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Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). The Second Amended Complaint
contains exactly one paragraph addressing the discovery rule. That paragraph reads:
“In April 2018, after establishment of the receiverships, Plaintiffs discovered the
financial misrepresentations by Defendants.” This short statement contains only
conclusory allegations as to the time of discovery, and is devoid of details regarding
Appellants’ “inability to have made earlier discovery despite reasonable diligence.”
Chubb, 710 F.3d at 975. Absent any factual enhancement, Appellants have failed to
plausibly plead delayed discovery.
Appellants argue that this Court should reverse the District Court’s denial of
leave to amend the Complaint further. “Dismissal with prejudice and without leave
to amend is not appropriate unless it is clear on de novo review that the complaint
could not be saved by amendment.” Eminence Cap., LLC v. Aspeon, Inc., 316 F.3d
1048, 1052 (9th Cir. 2003). However, “the district court’s discretion to deny leave
to amend is particularly broad where plaintiff has previously amended the
complaint.” Cafasso v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1058 (9th Cir.
2011) (quoting Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir.
1989)). Appellants were given an opportunity to correct their failure to plead the
discovery rule when the district court dismissed the First Amended Complaint. They
failed to overcome this deficiency. Accordingly, the district court did not abuse its
discretion by dismissing the Second Amended Complaint with prejudice.
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AFFIRMED.
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