File motion to dismiss an adversary complaint for fraud in United States Bankruptcy Court

File a motion to dismiss an adversary complaint for fraud in United States Bankruptcy Court is the topic of this blog post. A motion to dismiss is generally filed on the grounds that the adversary complaint fails to state a claim.

This type of motion is often called a 12(b)(6) motion as it is based on Federal Rule of Civil Procedure 12(b)(6) (FRCP), or Federal Rule of Bankruptcy Procedure 7012(b)(6) (FRBP). A party may also request in the alternative, that the party be required to provide a more definite statement under FRCP 12(e) or FRBP 7012(e).

FRCP and FRBP 12 (e) both state in pertinent part that, "A party may move for a more definite statement of a pleading to which a responsive pleading is allowed but which is so vague or ambiguous that the party cannot reasonably prepare a response. The motion must be made before filing a responsive pleading and must point out the defects complained of and the details desired".

The motion for a more definite statement may be joined with the motion to dismiss pursuant to FRCP and FRBP 12(g).

Many adversary complaints filed in bankruptcy courts are made under 11 U.S.C. § 523(a)(2) on the grounds of fraudulent representations. Note that FRCP 9(b) states in pertinent part that, "In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake".  The Ninth Circuit Court of Appeals has stated that this is a federally imposed requirement although the Court will examine state law to determine if the elements of fraud have been sufficiently alleged.

The reason for the particularity requirement is due to the fact that fraud is a serious charge against another party.

As the author generally works on cases from California, the great majority of the cases he works on are from one of the Districts in California, so any fraud claims would most likely be a California cause of action.

California law requires that four (4) elements be specifically pleaded in any cause of action for fraud

"A complaint for fraud must allege the following elements: (1) a knowingly false representation by the defendant; (2) an intent to deceive or induce reliance; (3) justifiable reliance by the plaintiff; and (4) resulting damages. Every element must be specifically pleaded." Service by Medallion, Inc. v. Clorox Co. 44 Cal.App.4th 1807, 1816 (1996).

And in California, pursuant to Code of Civil Procedure § 338(d) there is a three-year statute of limitations for an action for relief on the ground of fraud or mistake. The cause of action is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.

An action based on fraud may be brought more than three years after the fraud occurred if the plaintiff shows not only that he did not discover the facts but he could not with reasonable diligence have discovered them within that time.

While leave to amend is usually granted if a motion to dismiss is successful, the Ninth Circuit has ruled that leave to amend does not need to be granted where amending the complaint would be futile, and that any discretion to deny leave to amend is particularly broad where plaintiff has previously amended their complaint. 

A motion to dismiss and/or a motion for a more definite statement are very useful when used in the right situation as many adversary complaints for fraud are filed which fail to allege the fraud with particularity, or they are so vague and ambiguous that the defendant cannot reasonably prepare a proper response.

In the author’s experience filing a motion to dismiss can be particularly useful when it is obvious that plaintiff has a weak case. This will force plaintiff to seek leave to amend. Once plaintiff has previously amended their adversary complaint some judges will deny leave to amend where the moving party can show that amendment would be futile as plaintiff cannot state a cause of action for fraud.

Attorneys or parties who would like to view a portion of a sample 10 page motion to dismiss adversary complaint for fraud in United States Bankruptcy Court containing a memorandum of points and authorities with citations to case law and statutory authority and proof of service by mail sold by the author can use the link shown below.

Sample motion to dismiss adversary complaint for fraud

 

The author of this blog post, Stan Burman, is an entrepreneur and freelance paralegal who has worked in California and Federal litigation since 1995 and has created over 300 sample legal documents for California and Federal litigation.

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DISCLAIMER:

Please note that the author of this blog post, Stan Burman is NOT an attorney and as such is unable to provide any specific legal advice. The author is NOT engaged in providing any legal, financial, or other professional services, and any information contained in this blog post is NOT intended to constitute legal advice.

The materials and information contained in this blog post have been prepared by Stan Burman for informational purposes only and are not legal advice. Transmission of the information contained in this blog post is not intended to create, and receipt does not constitute, any business relationship between the author and any readers. Readers should not act upon this information without seeking professional counsel.