Gilbreath v. Hishmeh
2:25-cv-00869
| D. Ariz. | Jul 18, 2025Background
- Plaintiff Arthur Gilbreath III invested $300,000 in MyTown LLC in July 2021 and $50,000 in Hishmeh Ace Hardware in September 2022, seeking ownership and returns.
- Plaintiff received distributions from both investments and K-1 forms reflecting his ownership interests.
- Claims asserted include breach of contract, promissory estoppel, unjust enrichment, and violations of Section 10(b) and Rule 10b-5 of the Exchange Act, targeting both sets of defendants.
- Plaintiff alleged material omissions and misrepresentations by defendants regarding investment terms, management, risks, and projections.
- Defendants moved to dismiss on grounds of statute of limitations and failure to meet pleading standards under Rule 9(b) and the PSLRA.
- The court considered whether the securities fraud and related claims were time-barred and sufficiently pled.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Statute of limitations for securities fraud claims | Claims not time-barred as omissions not discoverable until later | Plaintiff should have been aware of omissions/misstatements at investment | Most claims are time-barred except one about Ace Hardware projections |
| Rule 9(b) & PSLRA pleading standards | Sufficiently pled misrepresentation with general allegations | Allegations lack particularity and factual detail | Dismissed for failure to meet required pleading standards |
| Leave to amend complaint | Requests leave to amend to shore up allegations | Futile—Plaintiff has shown no ability to plead more facts | Leave to amend denied |
| Procedural defect: Meet-and-confer certificate | Motion should be denied for technical procedural defect | Certificate provided in reply, technicality irrelevant | Court will not resolve on technicality; proceeds to merits |
Key Cases Cited
- Cousins v. Lockyer, 568 F.3d 1063 (9th Cir. 2009) (standard for motion to dismiss under Rule 12(b)(6))
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility pleading standard; legal conclusions not accepted as true)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must state a plausible claim to relief)
- Merck & Co. v. Reynolds, 559 U.S. 633 (2010) (when securities fraud statute of limitations begins)
- Foman v. Davis, 371 U.S. 178 (1962) (leave to amend should be freely given unless futile)
- Eldridge v. Block, 832 F.2d 1132 (9th Cir. 1987) (discretion in amendment to pleadings; preference for decision on merits)
- Madeja v. Olympic Packers, 310 F.3d 628 (9th Cir. 2002) (futility justifies denial of leave to amend)
- Nunes v. Ashcroft, 375 F.3d 805 (9th Cir. 2003) (futile amendments not permitted)