Tamer SALAMEH; Real Estate 4 Hospitality, LLC, A California Limited Liability Company; Aleksey Kats; Diana Kats; Mitchell J. Pereira; Gary A. Torretta; Robert Alvarenga; Alexis Cosio; Cesar Mota; Denis B. Rothe, Jr.; Charlene Schrufer; David R. Bushy; Dale Curtis; Zondra Schmidt; Dolores Green; Christy Jeske; Tazia Reyna; Mary L. Wee Song; Kerry L. Steigerwalt; Beth Steigerwalt; Stuart M. Wolman; Jeffrey E. Lubin; Barbara L. Lubin, Individually and as Co-Trustees of the Lubin Family Trust Dated 26 March 2002; Mikael Havluciyan; Therese Havluciyan, Individually and as Co-Trustees of the Havluciyan Family Trust; Sadoux Kim, Individually and on Behalf of a Class of All Others Similarly Situated, Virginia Gallanosa; Jose Gallanosa; Joey Clement; Kevin Henry; Andrew Paul; Steven Paul; Vito Micale; Philip Gutirrez; Barbara Behrle; Thomas Behrle; Danon Slinkard; Kim Henry; Sylvia Hoerr; Matthew Hoerr, Plaintiffs-Appellants, v. TARSADIA HOTEL, a California corporation; Tushar Patel, an individual; B.U. Patel, an individual; Gregory Casserly, an individual; 5th Rock LLC, a Delaware limited liability company; MPK One, LLC, a California limited liability company; Playground Destination Properties, a corporation; Gaslamp Holdings, LLC, a California limited liability company; Professional Mortgage Partners, Inc., Defendants-Appellees.
No. 11-55479.
United States Court of Appeals, Ninth Circuit.
Filed Aug. 13, 2013.
726 F.3d 1124
Argued and Submitted June 4, 2013.
In this regard, a PAGA plaintiff stands in a position comparable to a plaintiff in a shareholder derivative suit, who likewise lacks a direct proprietary interest in the subject of the litigation and sues as a proxy for the injured corporation. Id. at 546—47. Notwithstanding the individual recovery secured by successful shareholder derivative plaintiffs, we have long held their claims subject to aggregation, relying on the rationale that derivative suits vindicate corporate interests and benefit the shareholders only indirectly. Id. at 546-47 & n. 4.
That Private Attorney General Act plaintiffs do not vindicate “separate and distinct” claims is further evidenced by the fact that their claims under the Act are not assignable, Amalgamated Transit, 95 Cal.Rptr.3d 605, 209 P.3d at 943-44, and may be pursued by individual aggrieved employees only if the State elects not to take enforcement action,
For these reasons, a judgment in a representative action under the Act does not preclude aggrieved employees from later pursuing individual wage and hour, discrimination, or benefits interference claims founded on the same labor code violations. The rationale for this rule is that such claims are individual in nature, deriving from the aggrieved employee’s contractual relationship with the defendant. Thus, multiple employees filing individual actions cannot aggregate their wage and hour, discrimination, or benefits claims to satisfy the statutory amount-in-controversy requirement. See Potrero Hill Cmty. Action Comm. v. Hous. Auth. of the City & Cnty. of S.F., 410 F.2d 974, 977-78 (9th Cir.1969) (holding that common questions of law and fact do not suffice to establish the common and undivided interest necessary to aggregate multiple plaintiffs’ claims).
Because Urbino pursues a common and undivided claim in his role as proxy for the State, the district court correctly calculated the amount in controversy based on the aggregate civil penalties sought in this action, and properly determined that the total exceeded $75,000. Therefore, in my view, the district court properly exercised diversity jurisdiction.
Michael J. Aguirre (argued), Christopher S. Morris, and Maria C. Severson, Aguirre, Morris & Severson LLP, San Diego, CA, for Plaintiffs-Appellants.
Frederick H. Kranz (argued) and Lynn T. Galuppo, Cox, Castle & Nicholson LLP, Irvine, CA; Jonathan S. Kitchen and Ali P. Hamidi, Cox, Castle & Nicholson LLP, San Francisco, CA, for Defendants-Appellees Tarsadia Hotels, Tushar Patel, B.U. Patel, Gregory Casserly, 5th Rock, LLC,
Daniel M. Benjamin (argued) and Thomas W. McNamara, Ballard Spahr LLP, San Diego, CA, for Defendant-Appellee Playground Destination Properties, Inc.
Mark D. Cahn, Jacob H. Stillman, Randall W. Quinn, William K. Shirey, Securities and Exchange Commission, Washington, D.C., for Amicus Curiae Securities and Exchange Commission.
Benjamin G. Shatz, Timi A. Hallem, and Jason T. Taketa, Manatt, Phelps & Phillips, LLP, Los Angeles, CA, for Amici Curiae The Real Estate Roundtable and The National Association of Realtors.
Before: RONALD M. GOULD and N. RANDY SMITH, Circuit Judges, and SHARON L. GLEASON, District Judge.*
OPINION
GOULD, Circuit Judge:
A transaction that looks nothing like a sale of stock and involving such diverse items as citrus groves and vacation homes may qualify as a sale of a security under federal law. See SEC v. W.J. Howey Co., 328 U.S. 293, 66 S.Ct. 1100, 90 L.Ed. 1244 (1946); Hocking v. Dubois, 885 F.2d 1449 (9th Cir.1989) (en banc). Here, we must decide whether Plaintiffs-Appellants have alleged the sale of a security based on their purchase of condominiums in the Hard Rock Hotel San Diego. We hold that Plaintiffs have not adequately
I
Plaintiffs-Appellants, purchasers of condominiums in the Hard Rock Hotel San Diego, brought a putative class action against the Hotel’s developer, operator, broker, and related entities. Because the district court dismissed the complaint on the pleadings, the facts come from the second amended complaint, except where otherwise noted.
The Hotel is a twelve-story, mixed-use development with commercial space and 420 condominium units. Through television and print advertising, the public was offered the opportunity to buy condominiums in the Hotel. Plaintiffs each did so and later signed a rental-management agreement. Plaintiffs complain that the Purchase Contract they executed with 5th Rock, LLC not only sold them their condominiums but also obligated them to enter into the Rental Management Agreement with Tarsadia Hotels. Even though these contracts were executed with distinct entities eight to fifteen months apart,1 Plaintiffs allege that these contracts together form an investment contract because Plaintiffs have no control over their units and expect a profit only through the efforts of the Hotel developer and operator. For example, Plaintiffs were not issued keys to their units but had to obtain keys from the Hotel operator when staying in their units. The units had to be operated as part of the Hotel, and certain Defendants were responsible for daily management, operation, and marketing of the units. Plaintiffs also note that a local zoning ordinance prohibited them from occupying their units for more than 28 days per year.
Plaintiffs contend that this alleged investment contract did not comply with federal and state securities laws. Plaintiffs’ second amended complaint alleges eight claims for relief: (1) misrepresentation and omission in violation of
Defendants are Tarsadia Hotels, the Hotel operator; 5th Rock, LLC, the developer; Gaslamp Holdings, LLC, the owner of the land on which the Hotel sits; MPK One, LLC, the controlling entity that manages 5th Rock; Tushar Patel, Chairman of Tarsadia Hotels; B.U. Patel, Vice Chairman and founder of Tarsadia Hotels; Greg Casserly, President of Tarsadia Hotels; and Playground Destination Properties, Inc., a real-estate brokerage.2 Plaintiffs
The district court dismissed the second amended complaint. The court’s analysis turned primarily on its holding that Plaintiffs had not alleged that the condominium units constituted a security. Alternatively, the district court held that the securities claims were time-barred and that the fraud claims were not pleaded with the particularity required by Federal Rule of Civil Procedure 9(b). The district court denied leave to amend because “Plaintiffs have had ample opportunity to properly plead a case and have failed to do so.” This timely appeal followed.
II
We review de novo the district court’s dismissal of a complaint under Federal Rule of Civil Procedure 12(b)(6). N. Cnty. Cmty. Alliance, Inc. v. Salazar, 573 F.3d 738, 741 (9th Cir.2009). “If support exists in the record, [a] dismissal [for failure to state a claim] may be affirmed on any proper ground, even if the district court did not reach the issue or relied on different grounds or reasoning.” Steckman v. Hart Brewing, Inc., 143 F.3d 1293, 1295 (9th Cir.1998).
“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Zixiang Li v. Kerry, 710 F.3d 995, 999 (9th Cir.2013) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)) (internal quotation marks omitted). A claim is facially plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. The plausibility standard requires more than the sheer possibility or conceivability that a defendant has acted unlawfully. See id. at 678-79. “Where a complaint pleads facts that are merely consistent with a defendant’s liability, it stops short of the line between possibility and plausibility of entitlement to relief.” Iqbal, 556 U.S. at 678 (citation and internal quotation marks omitted). “[B]are assertions” are insufficient. Id. at 681; see also Coto Settlement v. Eisenberg, 593 F.3d 1031, 1034 (9th Cir.2010). We “discount[] conclusory statements, which are not entitled to the presumption of truth, before determining whether a claim is plausible.” Chavez v. United States, 683 F.3d 1102, 1108 (9th Cir.2012).
We review a district court’s decision to dismiss a complaint with prejudice for abuse of discretion. Okwu v. McKim, 682 F.3d 841, 844 (9th Cir.2012). A district court abuses its discretion if it applies the wrong legal rule or if its “application of the [correct] rule was illogical, implausible, or without support in the record.” In re Korean Air Lines Co., Ltd., 642 F.3d 685, 698 & n. 11 (9th Cir.2011) (citing United States v. Hinkson, 585 F.3d 1247, 1251 (9th Cir.2009) (en banc)).
III
The crux of Plaintiffs’ claims is that the sale of the hotel condominiums and the later Rental Management Agreement together constituted the sale of a security. We disagree and hold that the transactions did not constitute the sale of a security.
We review de novo whether a transaction is the sale of a security. Hocking, 885 F.2d at 1454. “Both section 2 of the Securities Act of 1933,
Although “ordinary real estate investments ... usually are not securities under either Federal or State law, the facts of each case determine whether or not particular instruments are securities.” Teague v. Bakker, 35 F.3d 978, 987 n. 9 (4th Cir.1994) (quoting Kosnoski v. Bruce, 669 F.2d 944, 947 n. 3 (4th Cir.1982)); Bender v. Cont’l Towers Ltd. P’ship, 632 F.Supp. 497, 500-01 (S.D.N.Y.1986); see also Thomas Lee Hazen, 1 Law Sec. Reg. § 1.6 (2013). As Shakespeare wrote, “[T]hat which we call a rose, [b]y any other name would smell as sweet.” William Shakespeare, Romeo and Juliet, act 2, sc. 2. The same principle applies here when determining whether a real-estate transaction is a security: substance governs, not name or label or form. United Hous. Found., Inc. v. Forman, 421 U.S. 837, 848, 95 S.Ct. 2051, 44 L.Ed.2d 621 (1975). What matters is the economic reality of the transaction. Id. So long as money is invested in a common enterprise with profits anticipated by virtue of others’ work, there may be an investment contract.
In Hocking v. Dubois, sitting en banc, we held that there was a genuine issue of material fact whether the sale of a condominium along with a rent-pooling arrangement constituted a security. Hocking worked with real-estate agent Dubois to find a condominium that he could use as an investment. Hocking, 885 F.2d at 1452. Dubois found a condominium in a resort complex and told Hocking that if he would buy the condominium, a rent-pooling arrangement would be available. Id. Under the rent-pooling arrangement, a management company
is responsible for renting as many of the participating units in the complex as possible; the rental income from the units is pooled, and after each owner is assessed a pro rata share of [the management’s] costs, each owner receives a pro rata share of the rental income, whether or not his individual unit has actually been rented.
Id. at 1453 n. 4. The record showed and we emphasized “that but for the availability of the rental pool arrangement [Hocking] would not have purchased the condominium.” Id. at 1453, 1455, 1458; see also id. at 1466 (Norris, J., dissenting).
We held that there was a genuine issue of material fact as to whether Dubois had offered Hocking the sale of a security.
Here, by contrast, Plaintiffs’ allegations are not sufficient to show that a security was sold when the condominiums were transferred. Plaintiffs allege no facts showing that the Purchase Contracts and the Rental Management Agreements were offered as a package. They do not allege that the Rental Management Agreement was promoted at the time of the sale. They do not allege that Defendants told them that the Rental Management Agreement would be forthcoming. They do not allege that they were told that the Rental Management Agreement would result in investment-like profits. But in Hocking our holding rested on facts supporting these types of allegations.4 Id. at 1457-58 (noting that inducement can be shown through “a thorough examination of the representations made by the defendants as the basis of the sale”); see also SEC v. Rubera, 350 F.3d 1084, 1091 (9th Cir.2003).
Plaintiffs allege that representations in the Hotel Guide and the Rental Management Agreement FAQs show that the Purchase Contract and Rental Management Agreement were a package, but they plead no facts establishing when the Guide and the FAQs were given to them. If Plaintiffs did not have these documents before they signed the Purchase Contracts, the representations in these documents are irrelevant in assessing whether a security was “presented” to the Plaintiffs at that time. See Hocking, 885 F.2d at 1458. For that matter, Plaintiffs do not even allege when the Purchase Contracts and Rental Management Agreements were signed. In a motion to dismiss, it was Defendants who told the district court that the Rental Management Agreements were executed eight to fifteen months after the Purchase Agreements. A large time gap between the real-estate purchase and the execution of a rental-management agreement may not be dispositive in every case. But see id. (noting the significance of the rent-pooling agreement being signed “immediately after the purchase agreement). Yet here, where Plaintiffs did not allege that the contracts were presented at the same time, the large time gap underscores our holding that Plaintiffs were not offered a security.5
Plaintiffs’ strongest argument that the two contracts, signed about a year apart, form a single transaction is their assertion that the “economic reality” shows that the two transactions are part and parcel of one scheme. They contend that the Purchase Contract, combined with external factors, such as the zoning ordinance, gave them no choice but to sign the Rental Management Agreement when it was later presented. This argument has some force. See Hocking, 885 F.2d at 1461; see also Tcherepnin v. Knight, 389 U.S. 332, 336, 88 S.Ct. 548, 19 L.Ed.2d 564 (1967). But to accept this argument, we not only would have to ignore the large time gap between the two transactions that were executed with different entities, but also the fact that Plaintiffs’ complaint is void of any allegation that they were induced to buy the condominiums by the Rental Management Agreement. The economic reality as we see it is that these two transactions were distinct. Moreover, Plaintiffs’ economic-reality argument rests on the implicit assumption that the only viable use for the condominiums was as an investment property, but there is no plausible reason why there cannot be a viable market for owner-occupied hotel-condominiums for use as short-term vacation homes. See Brief of Amici Real Estate Roundtable & National Association of Realtors 3-6. This conclusion undercuts Plaintiffs’ economic assumptions. See Forman, 421 U.S. at 858 (holding that a security does not exist “where [a consumer] purchases a commodity for personal consumption or living quarters for personal use”).
Taking all non-conclusory facts alleged in the complaint as true, we hold that Plaintiffs have not alleged the sale of a security and thus have not stated claims for relief under federal or state securities law. See
Next we turn to Plaintiffs’ common-law fraud claims. Unlike the securities-fraud claims, the common-law fraud claims do not necessarily require the sale of a security as an element of the claim. See Okun v. Morton, 203 Cal.App.3d 805, 250 Cal.Rptr. 220, 235 (1988) (listing the elements of common-law fraud: misrepresentation, knowledge of falsity, intent to induce reliance, justifiable reliance, and resulting damages). But here, Plaintiffs’ claims actually do depend on the sale of a
Additionally, Plaintiffs’ common-law fraud allegations do not satisfy Federal Rule of Civil Procedure 9(b). See Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1103 (9th Cir.2003) (“It is established law ... that Rule 9(b)’s particularity requirement applies to state-law causes of action.”). To meet this standard, Plaintiffs’ complaint must “identify the who, what, when, where, and how of the misconduct charged, as well as what is false or misleading about the purportedly fraudulent statement, and why it is false.” Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055 (9th Cir.2011) (internal quotation marks omitted). Plaintiffs’ common-law fraud allegations fall short of Rule 9(b)’s standard because they do not identify when Defendants made the representations that Plaintiffs purport to be false. For this reason as well, we affirm the district court’s dismissal of these claims.
IV
We also hold that the district court did not abuse its discretion in denying leave to amend. “Although a district court should grant the plaintiff leave to amend if the complaint can possibly be cured by additional factual allegations, [d]ismissal without leave to amend is proper if it is clear that the complaint could not be saved by amendment.” Zixiang Li, 710 F.3d at 998 (alteration in original) (quoting Kendall v. Visa U.S.A., Inc., 518 F.3d 1042, 1051 (9th Cir.2008)). A district court’s discretion to deny leave to amend is “particularly broad” where the plaintiff has previously amended. Sisseton-Wahpeton Sioux Tribe v. United States, 90 F.3d 351, 355 (9th Cir.1996) (quoting Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir.1989)).
Here, the district court denied leave to amend because “Plaintiffs have had ample opportunity to properly plead a case and have failed to do so.” Indeed, the district court gave Plaintiffs specific instructions on how to amend the complaint, and Plaintiffs did not comply. Moreover, Plaintiffs’ counsel represented to the district court that he knew additional facts that could solve the deficiencies in the complaint, but counsel never proffered these facts to the court. A plaintiff may not in substance say “trust me,” and thereby gain a license for further amendment when prior opportunity to amend had been given. The district court did not abuse its discretion by denying leave to amend. See In re Korean Air Lines Co., Ltd., 642 F.3d at 698 & n. 11 (citing Hinkson, 585 F.3d at 1251).
AFFIRMED.
RONALD M. GOULD
UNITED STATES CIRCUIT JUDGE