Shammam v. American Honda Finance Corporation

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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QUINTIN SHAMMAM, Case No.: 3:24-cv-00648-H-VET

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Plaintiff,

11 ORDER GRANTING IN PART AND

v. DENYING IN PART DEFENDANT’S

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MOTION FOR LEAVE TO AMEND

AMERICAN HONDA FINANCE

13 ANSWER AND FILE THIRD-PARTY

CORPORATION,

COMPLAINT

14 Defendant.

15 [Doc. No. 20]

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On September 27, 2024, Defendant American Honda Finance Corporation filed a

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motion for leave to (1) amend its answer to assert counterclaims against Plaintiff Quintin

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Shammam; and (2) file a third-party complaint against Danny Barka and ILS Labs, Inc.

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(Doc. No. 20.) On October 3, 2024, the Court took Defendant’s motion under submission.

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(Doc. No. 21.) On October 14, 2024, Plaintiff filed a response in opposition to Defendant’s

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motion for leave to amend its answer to assert counterclaims against Plaintiff. (Doc. No.

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22.) On October 21, 2024, Defendant filed a reply. (Doc. No. 25.) For the reasons below,

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the Court denies without prejudice Defendant’s motion for leave to amend its answer to

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assert counterclaims and grants its motion to file a third-party complaint.

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1 BACKGROUND

2 A. Factual Allegations in Plaintiff’s Complaint

3 On April 5, 2024, Plaintiff filed a complaint against Defendants including the

4 following factual allegations: Since December 1, 2023, Plaintiff has received at least 40

5 calls to his cellular telephone from Defendant, calling from the number (800) 532-8082.

6 (Compl., Doc. No. 1 ¶¶ 13, 15-19.) At least 30 of these calls included artificial or

7 prerecorded voice messages requesting Plaintiff call Defendant back. (Id. ¶ 14.) On

8 multiple occasions, Plaintiff picked up the call and was transferred to a live representative,

9 at which point Plaintiff requested Defendant’s representative stop calling him. (See id.

10 ¶¶ 15, 17-18.) On one of those occasions, Plaintiff asked Defendant’s representative if the

11 call was being recorded, and the representative confirmed that it was. (Id. ¶ 18.) Plaintiff

12 had not been given notice of the recording, nor had he consented to it. (Id.) At no time did

13 Plaintiff ever provide Defendant his phone number or consent to receiving calls from

14 Defendant. (Id. ¶¶ 12-13.) Based on these allegations, Plaintiff brings claims for:

15 (1) negligent violation of the Telephone Consumer Protection Act (“TCPA”); (2) knowing

16 and/or willful violation of the TCPA; (3) illegal recording of cellular phone conversations

17 under California Penal Code § 632.7; and (4) invasion of privacy. (Compl., Doc. No. 1

18 ¶¶ 45-66.)

19 B. Additional Factual Allegations in Defendant’s Proposed Amended Answer and

20 Third-Party Complaint

21 On May 30, 2024, Defendant filed an answer to Plaintiff’s complaint. (Doc. No.

22 10.) On September 27, 2024, Defendant filed the instant motion (Doc. No. 20), as well as

23 its proposed amended answer with counterclaims (Doc. No. 20-4; Doc. No. 20-5) and

24 proposed third-party complaint (Doc. No. 20-6).

25 Defendant’s motion is based on the following allegations: On or about May 18,

26 2020, Danny Barka and ILS Labs, Inc. (“ILS”) entered into a Closed-End Motor Vehicle

27 Agreement (“Agreement.”) (See Agreement, Doc. 20-1.) Defendant is the lessor under

28 the Agreement. (See id.)

1 In connection with the Agreement, Barka filled out a Personal Credit Application

2 and a Business Credit Application on behalf of ILS (collectively, “Credit Applications.”)

3 (See Doc. No. 20-2; Doc. No. 20-3.) In the Business Credit Application, Barka listed his

4 work telephone number as (619) 992-7172. (See Doc. No. 20-2 at 2.) He also provided

5 two credit references, one of whom was Plaintiff. (See id.) In the Personal Credit

6 Application, Barka listed Plaintiff as his nearest relative not living with him, stated Plaintiff

7 was his cousin, and listed Plaintiff’s phone number as (619) 444-0001. (See Doc. No. 20-

8 3 at 1.)

9 Through the Credit Applications, Barka and ILS consented to allow Defendant to

10 contact their telephone numbers via an automatic telephone dialing system and to record

11 such calls. (See Doc. No. 20-2; Doc. No. 20-3; Proposed Counterclaims, Doc. No. 20-4 at

12 26 ¶ 6; Proposed Third-Party Complaint, Doc. No. 20-6 at 3 ¶ 8.) The Agreement and both

13 Credit Applications contained provisions affirming that the information provided therein

14 was accurate. (See Doc. No. 20-1 at 4; Doc. No. 20-2; Doc. No. 20-3; Proposed

15 Counterclaims, Doc. No. 20-4 at 26 ¶¶ 7-8; Proposed Third-Party Complaint, Doc. No. 20-

16 6 at 3-4 ¶¶ 9-10.)

17 ILS and Barka defaulted under the Agreement. (Proposed Third-Party Complaint,

18 Doc. No. 20-6 at 4 ¶ 11.) Accordingly, Defendant began making calls to the telephone

19 number (619) 992-7172 regarding the Agreement and the underlying account. (Proposed

20 Counterclaims, Doc. No. 20-4 at 27 ¶ 9; Proposed Third-Party Complaint, Doc. No. 20-6

21 at 4 ¶ 11.). At the time, Defendant believed the phone number belonged to Barka and/or

22 ILS. (Id.) At no time did Barka or ILS advise Defendant that (619) 992-7172 belonged to

23 or was regularly used by someone else. (Proposed Counterclaims, Doc. No. 20-4 at 27

24 ¶ 10; Proposed Third-Party Complaint, Doc. No. 20-6 at 4 ¶ 11.) At no time did Barka or

25 ILS ever revoke their consent for Defendant to contact them at (619) 992-7172 or to record

26 such phone calls. (Id.)

27 Plaintiff has extensive ties with Barka and ILS. (Proposed Counterclaims, Doc. No.

28 20-4 at 27 ¶ 12.) For example, Plaintiff is Barka’s brother-in-law, Plaintiff is ILS’s agent

1 for service of process, and Plaintiff’s ex-wife Ann Shammam is ILS’s Secretary. (Id.)

2 Plaintiff, ILS, and Barka cooperated and conspired together to fraudulently induce

3 Defendant to call Plaintiff rather than Barka or ILS. (Id.) Plaintiff facilitated this scheme

4 by consenting to and encouraging Barka to represent on the Credit Applications that the

5 telephone number (619) 992-7172 belonged to Barka and/or ILS. (Id.)

6 By the present motion, Defendant moves the Court for an order granting it leave to:

7 (1) amend its answer to include counterclaims against Plaintiff, pursuant to Federal Rules

8 of Civil Procedure 13 and 15; and (2) file a third-party complaint against Barka and ILS,

9 pursuant to Federal Rule of Civil Procedure 14. (Doc. No. 20.)

10 DISCUSSION

11 A. Defendant’s Motion to Amend its Answer to Include Counterclaims Against

12 Plaintiff is Denied Without Prejudice

13 1. Legal Standards

14 Federal Rule of Civil Procedure 15(a) allows a party leave to amend a pleading once

15 as a matter of course within 21 days after serving it, or if the pleading is one to which a

16 responsive pleading is required, within 21 days after service of a responsive pleading or

17 motion under Rule 12(b), (e), or (f), whichever is earlier. “In all other cases, a party may

18 amend its pleading only with the opposing party’s written consent or the court’s leave. The

19 court should freely give leave when justice so requires.” Fed. R. Civ. P. 15(a). Decisions

20 regarding whether to grant leave to amend are “entrusted to the sound discretion of the trial

21 court.” Jordan v. Cnty. of Los Angeles, 669 F.2d 1311, 1324 (9th Cir. 1982), vacated on

22 other grounds, 459 U.S. 810 (1982). “Five factors are taken into account to assess the

23 propriety of a motion for leave to amend: bad faith, undue delay, prejudice to the opposing

24 party, futility of amendment, and whether the plaintiff has previously amended the

25 complaint.” Johnson v. Buckley, 356 F.3d 1067, 1077 (9th Cir. 2004) (citing Nunes v.

26 Ashcroft, 348 F.3d 815, 818 (9th Cir. 2003)).

27 Leave to amend a pleading may be denied “if the proposed amendment either lacks

28 merit or would not serve any purpose because to grant it would be futile[.]” Universal

1 Mortg. Co., Inc. v. Prudential Ins. Co., 799 F.2d 458, 460 (9th Cir. 1986). “A proposed

2 [amendment] is futile if it would be immediately ‘subject to dismissal.’” Nordyke v. King,

3 644 F.3d 776, 788 n.12 (9th Cir. 2011) (quoting Steckman v. Hart Brewing, Inc., 143 F.3d

4 1293, 1298 (9th Cir. 1998)). Accordingly, the “proper test to be applied when determining

5 the legal sufficiency of a proposed amendment is identical to the one used when

6 considering the sufficiency of a pleading challenged under Rule 12(b)(6).” Id. (quoting

7 Miller v. Rykoff-Sexton, Inc., 845 F.2d 209, 214 (9th Cir. 1988), overruled on other

8 grounds by Ashcroft v. Iqbal, 556 U.S. 662 (2009)). 1

9 A complaint will survive a Rule 12(b)(6) motion to dismiss if it contains “enough

10 facts to state a claim to relief that is plausible on its face.” Id. at 570. “A claim has facial

11 plausibility when the plaintiff pleads factual content that allows the court to draw the

12 reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v.

13 Iqbal, 556 U.S. 662, 678 (2009). “A pleading that offers ‘labels and conclusions’ or ‘a

14 formulaic recitation of the elements of a cause of action will not do.’” Id. (quoting

15 Twombly, 550 U.S. at 555). “Threadbare recitals of the elements of a cause of action,

16 supported by mere conclusory statements, do not suffice.” Id. “While legal conclusions

17 can provide the framework of a complaint, they must be supported by factual allegations.”

18 Id. at 679. Accordingly, dismissal for failure to state a claim is proper where the claim

19 “lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory.”

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23 1 Defendant argues in its reply that arguments regarding the sufficiency of its

proposed counterclaims would be more appropriately considered on a Rule 12(b)(6)

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motion to dismiss, citing Missouri ex rel. Koster v. Harris, 847 F.3d 646, 656 (9th Cir.

25 2017) for the proposition that amendment is futile when no set of facts can be proved that

would constitute a valid and sufficient claim. (Doc. No. 25 at 5.) But that case did not

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require the court to evaluate the legal sufficiency of a party’s proposed amendment, as

27 does the instant motion. Rather, the relevant question there was whether the district court

erred by not providing leave to amend when it granted a motion to dismiss the complaint.

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1 Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008); see L.A.

2 Lakers, Inc. v. Fed. Ins. Co., 869 F.3d 795, 800 (9th Cir. 2017).

3 At the pleadings stage, a district court must “accept the factual allegations of the

4 complaint as true and construe them in the light most favorable to the plaintiff.” L.A.

5 Lakers, 869 F.3d at 800 (quoting AE ex rel. Hernandez v. Cnty. of Tulare, 666 F.3d 631,

6 636 (9th Cir. 2012)). But a court need not accept “legal conclusions” as true. Iqbal, 556

7 U.S. at 678.

8 2. Analysis

9 Defendant seeks to add counterclaims for conspiracy to defraud and declaratory

10 relief. (Doc. No. 20 at 3.) Plaintiff argues that, among other reasons, the motion should

11 be denied because Defendant fails to state a claim, and therefore amendment would be

12 futile. (Doc. No. 22 at 6-8.) The Court agrees.

13 Under California law, “[t]he elements of fraud are: (1) a misrepresentation (false

14 representation, concealment, or nondisclosure); (2) knowledge of falsity (or scienter);

15 (3) intent to defraud, i.e., to induce reliance; (4) justifiable reliance; and (5) resulting

16 damage. Robinson Helicopter Co. v. Dana Corp., 34 Cal. 4th 979, 990 (2004). To state a

17 claim for conspiracy to defraud, Defendant must allege sufficient facts for civil conspiracy:

18 (1) formation and operation of a conspiracy; (2) wrongful acts done in furtherance of the

19 conspiracy; and (3) resulting damage. Wasco Prods. v. Southwall Techs., 435 F.3d 989,

20 992 (9th Cir. 2006); Cellular Plus, Inc. v. Superior Ct., 14 Cal. App. 4th 1224, 1236 (Cal.

21 Ct. App. 1993).

22 Further, under Federal Rule of Civil Procedure 9, Defendant must plead its

23 counterclaim for conspiracy to defraud with particularity. Fed. R. Civ. P. 9(b); see Wasco

24 Products, Inc., 435 F.3d at 992. This means that the party must allege the “who, what,

25 when, where, and how of the misconduct charged.” United States v. United Healthcare

26 Ins. Co., 848 F.3d 1161, 1180 (9th Cir. 2016). To this end, “mere conclusory allegations

27 of fraud are insufficient.” Id. “Broad allegations that include no particularized supporting

28 detail do not suffice, but statements of the time, place and nature of the alleged fraudulent

1 activities are sufficient.” Id. (citations omitted). Rule 9(b) serves three purposes: (1) to

2 provide defendants with adequate notice to allow them to defend the charge and deter

3 plaintiffs from the filing of complaints “as a pretext for the discovery of unknown wrongs”;

4 (2) to protect those whose reputation would be harmed as a result of being subject to fraud

5 charges; and (3) to “prohibit [ ] plaintiff[s] from unilaterally imposing upon the court, the

6 parties and society enormous social and economic costs absent some factual basis.” Kearns

7 v. Ford Motor Co., 567 F.3d at 1124 (quoting In re Stac Elecs. Sec. Litig., 89 F.3d 1399,

8 1405 (9th Cir. 1996)).

9 Here, Defendant’s allegations in support of its conspiracy to defraud claim are

10 insufficient under Rule 9(b)’s pleading requirements. Defendant alleges generally that

11 Plaintiff, Barka, and ILS “Plaintiff, ILS, and Barka cooperated and conspired together to

12 fraudulently induce AHFC to call Plaintiff rather than Barka or ILS.” (Proposed

13 Counterclaims, Doc. No. 20-4 at 25 ¶ 6.) But these are legal conclusions, which the court

14 need not accept as true. Iqbal, 556 U.S. at 678. Moreover, to meet the particularity

15 requirements of Rule 9(b), “mere conclusory allegations of fraud are insufficient.” United

16 Healthcare Ins. Co., 848 F.3d at 1180. Rather, Defendant must allege the “who, what,

17 when, where, and how of the misconduct charged.” (Id.)

18 Defendant alleges the following facts in support of its counterclaim: On the Business

19 Credit Application in support of the Agreement, Barka listed his phone number as (619)

20 992-7172. (Proposed Counterclaims, Doc. No. 20-4 at 25 ¶ 6.) This number actually

21 belonged to Plaintiff. (Id. at 27 ¶ 10.) In the Credit Applications, Barka provided Plaintiff

22 as a credit reference, stated that Plaintiff was Barka’s cousin, and listed Barka’s phone

23 number as (619) 444-0001. (Id. at 25-26 ¶ 6.) These allegations regarding Barka’s conduct

24 allege nothing about Plaintiff’s involvement in the alleged conspiracy to defraud.

25 Defendant alleges further that Plaintiff has “extensive ties” with Barka and ILS. (Id.

26 at 27 ¶ 12.) Specifically, Plaintiff is Barka’s brother-in-law and ILS’s agent for service of

27 process. (Id.) Defendant also alleges that Plaintiff’s ex-wife, Ann Shammam, is ILS’s

28 Secretary. (Id.) But these ties between Plaintiff and Barka do not give rise to the inference

1 that on any specific occasion Plaintiff conspired with Barka to deliberately misrepresent

2 Barka’s phone number on the Credit Applications.

3 Defendant alleges further that “Plaintiff, Barka, and ILS acted in concert with each

4 other and agreed expressly or tacitly to fraudulently induce AHFC to call the telephone

5 number (619) 992-7172, under the belief that it was Barka or ILS’s phone number.” (Id.

6 at 28 ¶ 19.) It alleges that “Plaintiff, Barka, and ILS knew that in doing so, AHFC would

7 call the telephone number (619) 992-7172 in order to service the lease owed by Barka and

8 ILS under the Agreement,” at which point “Plaintiff would then be able to file a TCPA and

9 CIPA lawsuit against AHFC, taking advantage of the fact that AHFC did not know that the

10 telephone number (619) 992-7172 did not belong to Barka or ILS.” (Id. at 28 ¶ 16.) But

11 these are broad allegations lacking any particularized supporting detail. While Defendant

12 has alleged the “who and what” of the alleged conspiracy, it fails to allege any details

13 regarding “when, where, and how” the conspiracy occurred. See United Healthcare Ins.

14 Co., 848 F.3d at 1180. Defendant’s vague allegations fail to inform Plaintiff what actions

15 he allegedly took on any particular occasion that constituted joining and furthering a

16 conspiracy with Barka and ILS, and are thus insufficient to satisfy the heightened pleading

17 standard under Rule 9(b).

18 For these reasons, Defendant’s proposed counterclaim for conspiracy to defraud fails

19 to state a claim, and granting Defendant leave to amend to add its counterclaims would be

20 futile. Further, Defendant’s counterclaim for declaratory relief is entirely derivative of its

21 claim for conspiracy to defraud. Because Defendant’s conspiracy to defraud claim is futile,

22 its declaratory relief claim is also futile. Accordingly, Defendant’s motion for leave to

23 amend its answer to assert counterclaims against Plaintiff is denied without prejudice.

24 B. Defendant’s Motion to File a Third-Party Complaint Against Barka and ILS is

25 Granted

26 Defendant seeks to file a third-party complaint against Barka and ILS for breach of

27 contract, intentional misrepresentation, negligent misrepresentation, equitable indemnity,

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1 and declaratory relief. (Doc. No. 20 at 2-3.) Plaintiff does not oppose Defendant’s request

2 to file a third-party complaint. (See Doc. No. 22.)

3 Under Federal Rule of Civil Procedure 14(a)(1), “[a] defending party may, as third-

4 party plaintiff, serve a summons and complaint on a nonparty who is or may be liable to it

5 for all or part of the claim against it. But the third-party plaintiff must, by motion, obtain

6 the court’s leave if it files the third-party complaint more than 14 days after serving its

7 original answer.” Fed. R. Civ. P. 14(a)(1). “The purpose of this rule is to promote judicial

8 efficiency by eliminating the necessity for the defendant to bring a separate action against

9 a third individual who may be secondarily or derivatively liable to the defendant for all or

10 part of the plaintiff’s original claim.” Sw. Adm’rs, Inc. v. Rozay’s Transfer, 791 F.2d 769,

11 777 (9th Cir. 1986).

12 A third-party claim may be asserted under Rule 14 “only when the third party’s

13 liability is in some way dependent on the outcome of the main claim and is secondary or

14 derivative thereto.” Stewart v. Am. Int’l Oil & Gas Co., 845 F.2d 196, 199 (9th Cir. 1988).

15 “‘The crucial characteristic of a Rule 14 claim is that defendant is attempting to transfer to

16 the third-party defendant the liability asserted against him by the original plaintiff. The

17 mere fact that the alleged third-party claim arises from the same transaction or set of facts

18 as the original claim is not enough.” Id. at 200 (quoting Wright & Miller, 6 Fed. Prac. &

19 Proc. § 1446 at 257 (1971 ed.)); see also United States v. One 1977 Mercedes Benz, 708

20 F.2d 444, 452 (9th Cir. 1983) (“It is not sufficient that the third-party claim is a related

21 claim; the claim must be derivatively based on the original plaintiff’s claim.”).

22 “The decision whether to implead a third-party defendant is addressed to the sound

23 discretion of the trial court.” Sw. Adm’rs, 791 F.2d at 777 (citing One 1977 Mercedes

24 Benz, 708 F.2d at 452). “Since the rule is designed to reduce multiplicity of litigation, it

25 is construed liberally in favor of allowing impleader.” KKMB, LLC v. Khader, 2020 WL

26 7978993, at *4 (C.D. Cal. June 17, 2020) (quoting Fed. Deposit Ins. Corp. v. Loube, 134

27 F.R.D. 270, 272 (N.D. Cal. 1991).

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1 Defendant argues that under Federal Rule of Civil Procedure 14, it may file a third-

2 party complaint against Barka and ILS because its equitable indemnity claim seeks to have

3 Barka and ILS indemnify Defendant for any damages incurred by Plaintiff on the

4 Agreement. (Id. at 12-14.) Under the doctrine of equitable indemnity, “defendants are

5 entitled to seek apportionment of loss between the wrongdoers in proportion to their

6 relative culpability so there will be equitable sharing of loss between multiple tortfeasors.”

7 Greystone Homes, Inc. v. Midtec, Inc., 168 Cal. App. 4th 1194, 1208 (2008) (quoting Gem

8 Developers v. Hallcraft Homes of San Diego, Inc., 213 Cal. App. 3d 419, 431 (1989)); see

9 also Stop Loss Ins. Brokers, Inc. v. Brown & Toland Med. Grp., 143 Cal. App. 4th 1036,

10 1040 (2006) (equitable indemnity is “available among tortfeasors who are jointly and

11 severally liable for the plaintiff’s injury”). A claim for equitable indemnity is “wholly

12 derivative” of the injured party’s claims. Prince v. Pac. Gas & Elec. Co., 45 Cal. 4th 1151,

13 1158 (2009).

14 Here, Defendant’s equitable indemnity claim seeks to transfer liability for Plaintiff’s

15 claims against Defendant to Barka and ILS, and is thus derivative of Plaintiff’s claims

16 against Defendant. Accordingly, Defendant’s claims for equitable indemnity against Barka

17 and ILS may properly be brought pursuant to Rule 14. See Stewart, 845 F.2d at 199 (“[A]

18 third-party claim may be asserted only when the third party’s liability is in some way

19 dependent on the outcome of the main claim and is secondary or derivative thereto.”).

20 Defendant argues further that in addition to its equitable indemnity claim, it may

21 assert other claims against Barka and ILS under Federal Rule of Civil Procedure 18. (Doc.

22 No. 20 at 14.) Indeed, Rule 18 provides that “[a] party asserting a . . . third-party claim

23 may join, as independent or alternative claims, as many claims as it has against an opposing

24 party.” Fed. R. Civ. P. 18(a).

25 Lastly, Defendant argues that the Court has supplemental jurisdiction over the claims

26 against Barka and ILS in its third-party complaint. (Doc. No. 20 at 15.) The federal

27 supplemental jurisdiction statute provides that if a court has original jurisdiction over a

28 case, it may exercise supplemental jurisdiction over “all other claims that are so related to

1 claims in the action ... that they form part of the same case or controversy under Article

2 of the United States Constitution.” 28 U.S.C. § 1367(a). Supplemental jurisdiction

3 || extends to claims that involve the joinder or additional parties. Id.

4 Here, the claims in Defendant’s third-party complaint against Barka and ILS concern

5 ||the same controversy as Plaintiff's action against Defendant. (Doc. No. 20 at 15.)

6 || Plaintiff's claims against Defendant allege that Defendant made and recorded telephone

7 || calls to Plaintiffs cell phone without Plaintiff's consent. Defendant’s proposed third-party

8 ||claims generally allege Barka and ILS breached the Agreement by misrepresenting that

9 || Plaintiff's number was their own, which induced Defendant to make the calls at issue in

10 || Plaintiff's claims against Defendant. Accordingly, the Court has supplemental jurisdiction

11 Defendant’s third-party claims against Barka and ILS.

12 For the reasons above, the Court grants Defendant leave to file a third-party

13 complaint against Barka and ILS.

14 CONCLUSION

15 For the reasons above, the Court DENIES without prejudice Defendant’s motion for

16 ||leave to amend its answer to assert counterclaims and GRANTS Defendant’s motion for

17 || leave to file a third-party complaint. Defendant must file its third-party complaint within

18 || 14 days from the date this order is filed.

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20 IT IS SO ORDERED.

21 || DATED: October 28, 2024 | | | ul | | |

22 MARILYN L- HUFF, District Fudge

23 UNITED STATES DISTRICT COURT

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