1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 DEAN BEAVER and LAURIE BEAVER, Case No.: 20-cv-00191-AJB-KSC
12 ORDER GRANTING IN PART AND Plaintiffs, 13 DENYING IN PART DEFENDANTS’ v. MOTIONS TO DISMISS. 14
OMNI HOTELS MANAGEMENT 15 (Doc. Nos. 19, 20) CORPORATION, a Delaware 16 Corporation; LC BROKERAGE CORP., a Delaware Corporation; LC 17 INVESTMENT 2010, LLC, a 18 Delaware Limited Liability Company; KELLY GINSBERG, an individual; 19 WILLIAM IMS, an individual; BRETT 20 ALEXANDER COMBS, an individual; and DOES 1 through 50, inclusive, 21
22 Defendants. 23 Before the Court are two motions to dismiss—one filed by Defendants Kelly 24 Ginsberg (“Ginsberg), William Ims (“Ims”), and Alexander Combs (“Combs”) 25 (collectively, “Broker Defendants”); and another filed by Defendants Omni Hotels 26 Management Corporation (“Omni), LC Brokerage Corp. (“LC Brokerage”), and LC 27 Investment 2010, LLC (“LC Investment”). (Doc. Nos 19, 20.) Plaintiffs Dean Beaver and 28 Laurie Beaver filed an opposition to the motions to dismiss, to which Defendants replied. 1 (Doc. Nos. 24, 26.) For the reasons set forth, the Court GRANTS IN PART and DENIES 2 IN PART the motions. 3 I. BACKGROUND1 4 Plaintiffs are husband and wife, who jointly own a villa located in the Omni La Costa 5 Resort and Spa (“Resort”), which is owned by LC Investment. Like approximately 98% of 6 villa owners at the Resort, Plaintiffs rent their villa pursuant to the terms of a Rental 7 Management Agreement (“RMA”) with LC Brokerage, a California-licensed real estate 8 brokerage company. LC Brokerage is an affiliate of Omni, the manager of the Resort. 9 The core of Plaintiffs’ claims concern Omni’s alleged years-long scheme to self-deal 10 through tortious and fraudulent interference with and management of the villa rental 11 program under the RMA. According to Plaintiffs, although LC Brokerage is ostensibly 12 charged with operating the rental program, it has quietly abdicated its responsibilities to 13 Omni, which has used and abused its power under the RMA to intentionally steer guests 14 into its own hotel rooms rather than the villas—causing Plaintiffs and other villa owners to 15 lose millions of dollars. 16 In addition, all villas are governed by the Unit Maintenance and Operations 17 Agreement (“UMA”), which entitles LC Investment (another Omni affiliate) to $100 per 18 night or 20% of a villa owner’s nightly rental revenue, if the owner opts not to use LC 19 Brokerage as its managing agent. Plaintiffs state that this high cost of leaving the rental 20 program forces villa owners into Omni’s program, because it is too expensive to rent 21 outside of Omni’s control. Plaintiffs claim that Omni, LC Brokerage, LC Investment, and 22 the individual brokers-of-record for LC Brokerage (Ginsberg, Ims, and Combs), have 23 perpetrated this RICO scheme to defraud by using LC Brokerage as an enterprise. Plaintiffs 24 bring the instant putative class action complaint against Defendants on behalf of 25 themselves and all others similarly situated (“Class”). 26 27 1 The following facts are taken from Plaintiffs’ complaint and are construed as true for the limited purpose 28 1 II. LEGAL STANDARD 2 A Rule 12(b)(6) motion to dismiss tests the legal sufficiency of a complaint, i.e. 3 whether the complaint lacks either a cognizable legal theory or facts sufficient to support 4 such a theory. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001) (citations omitted). For 5 a complaint to survive a Rule 12(b)(6) motion to dismiss, it must contain “sufficient factual 6 matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. 7 Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 8 570 (2007). In reviewing the motion, the court “must accept as true all of the allegations 9 contained in a complaint,” but it need not accept legal conclusions. Id. “Threadbare recitals 10 of the elements of a cause of action, supported by mere conclusory statements, do not 11 suffice.” Id. (citing Twombly, 550 U.S. at 555). 12 III. DISCUSSION 13 Plaintiffs’ complaint alleges the following causes of action: Breach of Contract, 14 Intentional Interference with Contract, Breach of Fiduciary Duty, Aiding and Abetting 15 Breach of Fiduciary Duty, Violations of Bus. & Prof. Code § 17200 et seq., Violations of 16 18 U.S.C. § 1962(c), Violations of 18 U.S.C. § 1962(d), Declaratory Relief, Unjust 17 Enrichment, and Accounting. Defendants raise various challenges to these claims. In 18 addition, Plaintiffs argue that Omni and LC Brokerage are precluded from raising certain 19 arguments they raised in a prior litigation in San Diego Superior Court against a different 20 villa owner (“Erskine lawsuit”).2 These issues are discussed in turn. 21 22 23
24 2 On a motion to dismiss, the Court may take judicial notice of documents outside of Plaintiffs’ complaint 25 that are “matters of public record” as long as the facts noticed are not “subject to reasonable dispute.” Intro–Plex Technologies, Inc. v. Crest Group, Inc., 499 F.3d 1048, 1052 (9th Cir.2007) (citations omitted); 26 see also Fed. R. Evid. 201(b). As such, the Court grants the parties’ respective requests for judicial notice of exhibits attached to Doc. Nos. 25 and 26 as they contain matters of public record and are not subject to 27 reasonable dispute. See Intro–Plex Technologies, Inc., 499 F.3d at 1052; Rey’s Pasta Bella LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006) (taking judicial notice of pleadings, memoranda, and 28 1 1) Issue Preclusion 2 Offensive nonmutual issue preclusion is appropriate only if (1) there was a full and 3 fair opportunity to litigate the identical issue in the prior action; (2) the issue was actually 4 litigated in the prior action; (3) the issue was decided in a final judgment; and (4) the party 5 against whom issue preclusion is asserted was a party or in privity with a party to the prior 6 action. Syverson v. Int’l Bus. Machines Corp., 472 F.3d 1072, 1078 (9th Cir. 2007). “The 7 party asserting preclusion bears the burden of showing with clarity and certainty what was 8 determined by the prior judgment.” Offshore Sportswear, Inc. v. Vuarnet Int’l, B.V., 114 9 F.3d 848, 850 (9th Cir. 1997). 10 Plaintiffs contend that issue preclusion applies to bar Omni and LC Brokerage from 11 arguing that the RMA permitted LC Brokerage to prioritize rental of hotel rooms over the 12 villas, that Omni could not be sued directly under the RMA, and that the RMA disclaimed 13 any fiduciary duties of LC Brokerage or Omni connected to their management of the rental 14 program. According to Plaintiffs, after a full trial on the merits in the Erskine lawsuit, the 15 state court judge found that Omni and LC Brokerage breached their obligations under the 16 RMA by, amongst other things, failing to adequately price the villas and steering customers 17 into the hotel. The state court documents, however, do not fully support Plaintiffs’ position 18 because they do not clearly show “with clarity and certainty what was determined by the 19 prior judgment.” Offshore Sportswear, Inc., 114 F.3d at 850. 20 While the state court’s “Final Statement and Decision” and “Amended Judgment” 21 state that both the villa owner and LC Brokerage and Omni “breached their obligations,” 22 the documents do not contain any express finding on whether the RMA permitted LC 23 Brokerage to prioritize hotel rooms over the villas, whether Omni could be sued under the 24 RMA, and whether the RMA disclaimed any fiduciary duties. (Doc. Nos. 25-9 at 5; 26-2 25 at 6.) 3 The state court documents also do not identify which provision of the RMA was 26 found to have been breached. 27
28 1 Moreover, unlike here, the Erskine judge was tasked with deciding whether either 2 side’s actions were excused on the basis of an anticipatory breach by the other side. (See 3 Doc. Nos. 25-9 at 5 (“Both sides had competing burdens of proof and the Court cannot say 4 that it was persuaded that either’s case was more likely than not true than the others.”); 5 26-2 at 6 (“[N]either side was able to prove an anticipatory breach”).) Indeed, because the 6 judge found that “both parties breached their obligations, with no side clearly breaching 7 first,” neither was entitled to damages and neither was a prevailing party. (Doc. Nos. 25-9 8 at 5, 6; 26-2 at 6, 7.) Thus, without sufficient clarity and certainty on what was specifically 9 determined by a prior judgment—especially where that judgment resulted from a factually 10 distinct case—the Court does not find that Plaintiffs have met their burden of showing that 11 issue preclusion is appropriate in this case. As such, the Court proceeds to analyze the 12 sufficiency of Plaintiffs’ causes of action against Defendants’ challenges. 13 2) Breach of Contract 14 Plaintiffs alleges that LC Brokerage and Omni are liable for a breach of contract 15 because under the RMA, LC Brokerage was appointed as the “sole” and “exclusive” rental 16 agent to act on behalf of villa owners. Plaintiffs’ claims that LC Brokerage abdicated its 17 responsibilities under the RMA to Omni, which used its control over the rental program to 18 price the villas for its own advantage, rather than to maximize the revenues of villa owners. 19 Defendants move to dismiss Plaintiffs’ breach of contract claim because (1) Omni is not a 20 signatory to the RMA and (2) the express terms of the RMA reveal that LC Brokerage’s 21 conduct does not amount to a breach. 22 As to the first argument, the face of the complaint makes clear that Omni is not a 23 signatory to the RMA. Consequently, Omni is not a party to the contract and therefore 24 cannot be liable for a breach under the RMA. See Clemens v. Am. Warranty Corp., 193 25 Cal.App.3d 444, 452 (1987) (“Under California law, only a signatory to a contract may be 26 liable for any breach.”); Tri-Continent Internat. Corp. v. Paris Sav. & Loan Assn., 12 27 Cal.App.4th 1354, 1359 (1993) (“[Plaintiff] cannot assert a claim for breach of contract 28 against one who is not a party to the contract.”). Plaintiffs maintain that the breach of 1 contract against Omni should be sustained because they have alleged that Omni and LC 2 Brokerage are alter-egos. However, apart from listing that one of the common questions 3 among the class members is “[w]hether Omni is an alter-ego of LC Brokerage,” the 4 complaint contains no other allegations to invoke the alter ego doctrine. (Doc. No. 1 at 23.) 5 Plaintiffs must plead more. Indeed, there is no allegation that Omni is LC Brokerage’s alter 6 ego, nor are there facts to support the alter ego elements of (1) unity of interest and 7 ownership and (2) inequitable result if the doctrine is not applied. See Wehlage v. EmpRes 8 Healthcare, Inc., 791 F. Supp. 2d 774, 782 (N.D. Cal. 2011). Because Omni is not a 9 signatory to the contract and Plaintiffs have not adequately pled the alter ego doctrine, the 10 Court finds that Plaintiffs have not sufficiently stated a breach of contract claim against 11 Omni. Accordingly, Plaintiffs’ breach of contract claim against Omni will be DISMISSED 12 WITH LEAVE TO AMEND. Inclusion of additional facts may cure the aforementioned 13 deficiencies. See Fed. R. Civ. P. 15(a); Cook v. Northern California Service, Inc., 911 F.2d 14 242, 247 (9th Cir. 1990) (“[A] district court should grant leave to amend even if no request 15 to amend the pleading was made, unless it determines that the pleading could not possibly 16 be cured by the allegation of other facts.”). 17 Defendants’ second argument against Plaintiffs’ breach of contract claim is one of 18 contract interpretation. In Defendants’ view, the RMA expressly permits the conduct that 19 Plaintiffs allege is a breach. “Resolution of contractual claims on a motion to dismiss is 20 proper if the terms of the contract are unambiguous.” Bedrosian v. Tenet Healthcare Corp., 21 208 F.3d 220 (9th Cir. 2000). “A contract provision will be considered ambiguous when it 22 is capable of two or more reasonable interpretations.” Monaco v. Bear Stearns Residential 23 Mortg. Corp., 554 F. Supp. 2d 1034, 1040 (C.D. Cal. 2008) (citing Bay Cities Paving & 24 Grading, Inc. v. Lawyers’ Mut. Ins. Co., 5 Cal. 4th 854, 867 (1993)). “Language in a 25 contract must be interpreted as a whole and in the circumstances of the case.” Id. (citing 26 Bank of W. v. Superior Court, 2 Cal. 4th 1254, 1265 (1992)). If the language “leaves doubt 27 as to the parties’ intent,” Consul Ltd. v. Solide Enters., Inc., 802 F.2d 1143, 1149 (9th Cir. 28 1986), the motion to dismiss must be denied. Monaco, 554 F. Supp. 2d at 1040. 1 The Court finds that, at this stage of the proceeding, Plaintiffs have raised a 2 reasonable interpretation of the RMA. In Plaintiffs’ view, pursuant to the terms of the 3 RMA, LC Brokerage was to act as their “exclusive rental agent” with the “sole and 4 exclusive authority” to “set rental rates” for villas and required to “maximize the rental 5 receipts” on behalf of villa owners. (Doc. Nos. 1 at 6, 7; 1-2 at 3) Plaintiffs allege that 6 “[t]he rental program was given to LC Brokerage rather than Omni to guard against the 7 inherent conflict-of-interest between Omni’s incentive to rent its own hotel rooms — where 8 Omni collects all of the revenue — before renting villas, where Omni collects only a share 9 of the revenue.” (Doc. No. 1 at 7.) And although the RMA provides that “Agent [LC 10 Brokerage] shall retain, hire, supervise and discharge all labor and employees required for 11 rental of the Property,” Plaintiffs claim that the RMA does not allow LC Brokerage to 12 delegate all of its responsibilities to Omni without supervision. (Doc. No. 1-2 at 4.) The 13 Court finds that Plaintiffs’ interpretation of the duties owed and potential breach under the 14 RMA is grounded in specific terms of the contract for which they offer a reasonable 15 interpretation. Because Plaintiffs have raised a reasonable interpretation of the RMA, 16 dismissal of the breach of contract claim against LC Brokerage is improper at this stage. 17 See Monaco, 554 F. Supp. 2d at 1040. 18 3) Intentional Interference with Contract 19 Plaintiffs allege that Omni intentionally interfered with the contract (the RMA) 20 between Plaintiffs and LC Brokerage. Omni moves to dismiss this cause of action as barred 21 by the statute of limitations. The parties do not dispute that California law applies. “The 22 limitations period for an intentional-interference-with-contract claim is within ‘two years’ 23 of the claimant ‘discovering the loss or damage suffered.’” First Fin. Sec., Inc. v. Freedom 24 Equity Grp., LLC, No. 15-CV-01893-HRL, 2016 WL 3017552, at *4 (N.D. Cal. May 26, 25 2016) (alterations omitted) (quoting Cal. Code Civ. P. § 339(1)). 26 On the face of the complaint, Plaintiffs discovered Omni’s alleged interference with 27 the RMA in October or August of 2017 and filed their complaint in January 2020—beyond 28 the two-year statute of limitations period. Plaintiffs contend, however, that because they 1 allege an ongoing scheme of interference with the RMA by Omni, their claim is timely 2 under the continuing violation doctrine. Defendants retort that neither the continuing tort 3 doctrine or continual accrual theory have been applied to intentional interference torts. The 4 Court agrees. See DC Comics v. Pac. Pictures Corp., 938 F. Supp. 2d 941, 949 (C.D. Cal. 5 2013) (“Indeed, the parties cite no cases, and the Court has found none, directly applying 6 either of California's continuing-wrong principles to tortious-interference claims.”);4 Boon 7 Rawd Trading Int’l Co. v. Paleewong Trading Co., 688 F. Supp. 2d 940, 952 (N.D. Cal. 8 2010) (“Indeed, based upon an examination of California decisions that have applied the 9 ‘continuing tort’ doctrine, none have extended the doctrine to the tort of intentional 10 interference with prospective economic advantage.”). Accordingly, Plaintiffs’ intentional 11 interference with contract claim against Omni will be DISMISSED WITHOUT LEAVE 12 TO AMEND. See Hartmann v. Cal. Dep’t of Corr. & Rehab., 707 F.3d 1114, 1130 (9th 13 Cir. 2013) (“A district court may deny leave to amend when amendment would be futile.”). 14 4) Breach of Fiduciary Duty 15 Plaintiffs allege that all Defendants, except LC Investment 2010, breached their 16 fiduciary duty to Plaintiffs. “The elements of a cause of action for breach of fiduciary duty 17 are the existence of a fiduciary relationship, its breach, and damage proximately caused by 18 that breach.” City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 68 19 Cal.App.4th 445, 483 (1998). Defendants argue that Plaintiffs have not established either 20 a duty or a breach. Defendants maintain that although Plaintiffs allege that Defendants’ 21 fiduciary duty arose from the RMA, the RMA expressly permits Plaintiffs’ alleged breach. 22 The Court rejects Defendants’ argument that the RMA cannot have given rise to 23 fiduciary duties. Based on the RMA’s terms and description of LC Brokerage as Plaintiffs’ 24 agent, who exercises exclusive control over their villa and charged with, among other 25
26 4 Like the court in DC Comics, the Court declines to adopt Plaintiffs’ general citation to Aryeh v. Canon Bus. Sols., Inc., 55 Cal.4th 1192 (2013) for the proposition that all common-law tolling doctrines applies 27 to their tortious interference claim. See DC Comics, 938 F. Supp. 2d at 950 (distinguishing Aryeh and expressing “serious reservations about whether continuing-wrong principles could ever toll the statute of 28 1 things, maximizing the villa’s rental revenues on behalf of Plaintiffs, it is reasonable to 2 infer that a fiduciary relationship existed. See Sierra Pacific Industries v. Carter, 104 3 Cal.App.3d 579, 581 (1980) (“An agent bears a fiduciary relationship to his or her 4 principal[.]”). Moreover, Plaintiffs allege that Omni is a sub-agent of LC Brokerage 5 because it “stepped into LC Brokerage’s shoes by taking over rental management 6 responsibilities under the RMA.” (Doc. No. 1 at 27.) The Court agrees that such allegations 7 are sufficient to reasonably infer a fiduciary relationship. See Cal. Civ. Code § 2351 8 (sub-agent “represents the principal in like manner with the original agent”); Streit v. 9 Covington & Crowe, 82 Cal.App.4th 441, 446 n. 3 (2000) (“subagent owes the same duties 10 to the principal as does the agent”). See also generally Pierce v. Lyman, 1 Cal.App.4th 11 1093, 1104 (1991) (discussing caselaw to support a finding that one’s active participation 12 in the breach of another’s fiduciary duty, even where he himself is not a fiduciary, is liable 13 for such a breach). The Court further finds that Plaintiffs have stated a breach of fiduciary 14 duty claim under the RMA against the Broker Defendants because they are the managing 15 agents and licensed corporate real estate agents for LC Brokerage and are alleged to have, 16 together with LC Brokerage, abdicated all responsibilities under the RMA to Omni. (Doc. 17 No. 1 at 27, 28.) Moreover, for reasons similar to that explained in supra § III.2, 18 Defendants’ arguments that the RMA forecloses a breach of fiduciary duty is unavailing at 19 this stage of the litigation. In sum, there being adequate allegations to support the existence 20 of a fiduciary duty and a breach, the Court rejects Defendants’ motion to dismiss on these 21 bases.5 22 5) Aiding and Abetting Breach of Fiduciary Duty 23 Plaintiffs allege that Broker Defendants aided and abetted a breach of fiduciary duty. 24 “To state a claim for aiding and abetting breach of fiduciary duty under California law, a 25 plaintiff must allege that the defendant: (1) had actual knowledge of the specific primary 26
27 5 Because the Court finds that a fiduciary duty arose from the RMA, the Court need not address in this section whether Plaintiffs stated facts sufficient to allege that a fiduciary duty arose from Bus. & Prof. 28 1 wrong being committed by the fiduciary; and (2) provided substantial assistance to the 2 fiduciary to accomplish the specific breach of fiduciary duty.” In re Mortgage Fund ‘08 3 LLC, 527 B.R. 351, 361 (N.D. Cal. 2015). Defendants argue that Plaintiffs’ complaint does 4 not allege acts that would amount to “substantial assistance” in Omni or LC Brokerage’s 5 alleged breach of fiduciary duty. 6 The complaint, however, alleges that Broker Defendants knew that LC Brokerage 7 never supervised or administered the rental program, that Omni has always administered 8 and controlled the program with no supervision by LC Brokerage, and that they knew, at 9 the time buyers signed the RMA, that LC Brokerage would have no responsibility for the 10 rental program yet did not disclose this fact to the buyers. (Doc. No. 1 at 9, 15.) The 11 complaint also alleges that Broker Defendants enabled the alleged self-dealing scheme “by 12 lending their licenses to LC Brokerage in order to establish a separate licensed entity to 13 countersign the RMA with villa owners.” (Id. at 15.) The complaint goes on to state that as 14 brokers of record, Broker Defendants “were specifically aware that LC Brokerage was the 15 signatory to the RMA, yet they did nothing to manage or supervise the rental program. 16 Instead, they ignored their professional responsibilities and enabled Omni to perpetrate its 17 scheme to self-deal.” (Id.) The Court finds that these factual allegations, coupled with the 18 reasonable inferences drawn therefrom, sufficiently show Broker Defendants’ “substantial 19 assistance” in Omni or LC Brokerage’s alleged breach of fiduciary duty. Accordingly, the 20 Court declines to dismiss Plaintiffs’ aiding and abetting claim. 21 6) Violations of Bus. & Prof. Code § 17200 et seq. 22 Plaintiffs assert a cause of action arising under Section 17200 of the California 23 Business and Professions Code (UCL) against all Defendants, alleging that they have set 24 up a lucrative scheme to bilk villa rental revenue. The UCL prohibits business acts or 25 practices that are “unlawful, unfair or fraudulent” Cal. Bus. & Prof. Code § 17200. “Each 26 of these three prongs constitutes a separate and independent cause of action.” Vasic v. 27 PatentHealth, L.L.C., 171 F. Supp. 3d 1034, 1042 (S.D. Cal. 2016) (citation omitted). 28 1 A. Unlawful Prong 2 “[A] violation of another law is a predicate for stating a cause of action under the 3 UCL’s unlawful prong.” Berryman v. Merit Property Management, Inc. 152 Cal.App.4th 4 1544, 1554 (2007). As the predicate for their UCL claim under the unlawful prong, 5 Plaintiffs allege that Defendants have violated Cal. Bus. & Prof. Code § 10131(b). 6 According to Plaintiffs, “contrary to the statutory scheme governing the duties of real estate 7 brokers and licensed real estate corporations, Omni runs the rental program without a 8 corporate real estate license and without the supervision of any licensed real estate agent.” 9 (Doc. No. 1 at 30.) Plaintiffs further allege that Broker Defendants have “breached their 10 statutory obligations by failing to supervise the rental program ostensibly run by Defendant 11 LC Brokerage.” (Id.) Defendants, however, argue that the real estate broker and related 12 requirements under § 10131(b) do not apply, and Plaintiffs’ complaint fails to address the 13 clearly applicable exceptions to § 10131(b). The Court agrees. 14 The parties do not dispute that § 10131(b) does not apply to hotel managers or 15 transient occupancies (30 days or less) in a dwelling unit in a common interest 16 development. Cal. Bus. & Prof. Code § 10131.01. Assuming the truth of Plaintiffs’ 17 allegations that the villas “are like hotel rooms,” and that they “are vacation-rental 18 properties,” it appears from the face of the complaint that the transient occupancy exception 19 to § 10131(b) applies. Plaintiffs’ failure to plead facts to disclaim the apparent exception 20 therefore supports dismissal of their UCL claim under the unlawful prong. Accordingly, as 21 Plaintiffs’ have failed to identify an “unlawful” predicate, their UCL claim under the 22 unlawful prong will be DISMISSED WITH LEAVE TO AMEND. Inclusion of 23 additional facts may cure the aforementioned deficiency. See Fed. R. Civ. P. 15(a); Cook, 24 911 F.2d at 247. 25 B. Unfair Prong 26 To state a claim under the unfair prong of the UCL, a plaintiff needs to plead conduct 27 that is unfair because it (1) “offends an established public policy” or (2) “is immoral, 28 unethical, oppressive, unscrupulous or substantially injurious to consumers” and the utility 1 of that conduct is outweighed by the harm to the consumer. Davis v. HSBC Bank Nev., 2 N.A., 691 F.3d 1152, 1169 (9th Cir. 2012). Plaintiffs allege that the Defendants’ “scheme 3 is immoral, unethical, oppressive, substantially injurious, and has no countervailing benefit 4 or reason for its purpose.” (Doc. No. 1 at 30.) Plaintiffs provided various allegations in 5 their complaint to show that Defendants conspired with each other to surreptitiously hand 6 rental management control to Omni, which purposefully steered guests into hotel rooms 7 over the villas, earning tens of millions of dollars at Plaintiffs’ and the Class’ expense. (See 8 id. at 9–12, 28–30.) The complaint’s description of the purported self-dealing scheme 9 contain detailed facts sufficient to raise a reasonable inference of “unfair” conduct. Thus, 10 assuming Plaintiffs’ allegations to be true and construing all reasonable inferences 11 therefrom in the light most favorable to them, the Court finds that Plaintiffs have 12 adequately pled a claim under the unfair prong of the UCL. 13 C. Fraudulent Prong 14 To state a claim under the fraudulent prong of the UCL, courts utilize the “reasonable 15 consumer” standard, which requires the plaintiff to “show that members of the public are 16 likely to be deceived.” Williams v. Gerber Prods. Co., 552 F.3d 934, 938 (9th Cir. 2008) 17 (internal citation and quotation marks omitted). If a UCL claim is grounded in alleged 18 fraud, the heightened pleading standard of Federal Rule of Civil Procedure 9(b) applies. 19 Kearns v. Ford Motor Co., 567 F.3d 1120, 1127 (9th Cir. 2009). Additionally, the UCL 20 “imposes an actual reliance requirement on plaintiffs prosecuting a private enforcement 21 action under the UCL’s fraud prong.” In re Tobacco II Cases, 46 Cal.4th 298, 326 (2009). 22 “Reliance is proved by showing that the defendant’s misrepresentation or nondisclosure 23 was ‘an immediate cause’ of the plaintiff's injury-producing conduct.” Id. (alterations 24 omitted). 25 Defendants argue that Plaintiffs’ sole allegation of reliance is directed only at LC 26 Brokerage, and as such, they have failed to plead a UCL claim under the fraud prong 27 against the other defendants. The Court agrees. Defendants further argue that Plaintiffs 28 cannot state facts to support reliance because the complaint makes plain that the villas were 1 developed and sold in the mid-2000s by the prior owner of the Resort. The complaint also 2 establishes that none of the defendants were involved in the development or operations of 3 the Resort at that time. Defendants contend that because any alleged inducement occurred 4 prior to Defendants’ involvement, Plaintiffs’ fraud claim is not actionable against them. 5 Plaintiffs offered no response to this specific argument, but instead, generally asserted that 6 they have satisfied the elements of the fraud prong. As the Court does not find that 7 amendment would be futile with respect to this claim, Plaintiffs’ UCL claim under the 8 fraud prong will be DISMISSED WITH LEAVE TO AMEND. 9 7) Violations of 18 U.S.C. § 1962(c) 10 Plaintiffs also allege a claim under 18 U.SC. § 1962(c), the Racketeer Influenced 11 and Corrupt Organizations Act (“RICO”), against Omni, LC Brokerage, and Broker 12 Defendants. The statute provides that “[i]t shall be unlawful for any person employed by 13 or associated with any enterprise engaged in, or the activities of which affect, interstate or 14 foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such 15 enterprise’s affairs through a pattern of racketeering activity or collection of unlawful 16 debt.” 18 U.S.C. § 1962(c). A prima facie case for RICO under § 1962(c) requires “(1) 17 conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.” Sedima, 18 S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496 (1985). Plaintiffs must also show harm of a 19 specific business or property interest by the racketeering conduct. Id.; Diaz v. Gates, 420 20 F.3d 897, 900 (9th Cir.2005). “Racketeering activity” is any act indictable under the several 21 provisions of Title 18 of the United States Code, including the predicate acts alleged by 22 plaintiffs in this case: mail fraud (18 U.S.C. § 1341), and wire fraud (18 U.S.C. § 1343). 23 See 18 U.S.C. § 1961(1); Turner v. Cook, 362 F.3d 1219, 1229 (9th Cir. 2004). 24 Defendants argue that Plaintiffs fail to identify, with the required particularity under 25 Rule 9(b), predicate acts of wire fraud or mail fraud. For mail and wire fraud, a plaintiff 26 must allege (1) formation of a scheme to defraud, (2) use of the United States mail or wire 27 in furtherance of the scheme to defraud, and (3) specific intent to deceive or defraud. 28 Schreiber Distrib. Co. v. Serv–Well Furniture Co., Inc., 806 F.2d 1393, 1399–1400 (9th 1 Cir. 1986). Federal Rule of Civil Procedure 9(b)’s heightened pleading requirements apply 2 to predicate acts involving fraud. Edwards v. Marin Park. Inc., 356 F.3d 1058, 1065–66 3 (9th Cir. 2004). “[A] party must state with particularity the circumstances constituting 4 fraud.” Fed. R. Civ. P. 9(b). “Allegations of mail fraud under section 1962(a)–1962(c) 5 ‘must identify the time, place, and manner of each fraud plus the role of each defendant in 6 each scheme.’” Schreiber Distrib. Co., 806 F.2d at 1401 (citation omitted). 7 Upon review of the complaint, the Court finds that Plaintiffs have sufficiently pled 8 the predicate acts of wire fraud and mail fraud. The complaint provides that Defendants 9 “made extensive use of the mail and wires to perpetrate Omni’s self-dealing” and outlined 10 examples of such use. (Doc. No. 1 at 73.) In the examples, Plaintiffs identified specific 11 mailings and wires alleged to have been transmitted to villa owners, including one in Texas, 12 in furtherance of the scheme to defraud, as well as provided a particular timeline of events. 13 (Id. at 73, 128.) The complaint also contains allegations pertaining to Defendants’ roles in 14 the scheme. As such, the Court rejects Defendants’ contention that Plaintiffs failed to plead 15 the predicate acts of mail and wire fraud with sufficient particularity. 16 Defendants additionally contend that Plaintiffs have not sufficiently alleged a pattern 17 of racketeering. The Court disagrees. The complaint alleges that Defendants made use of 18 monthly mailing and wirings of monies of the course of six years to various villa owners, 19 in furtherance of the alleged scheme. As these allegations describe multiple instances of 20 mail and wire fraud, Plaintiffs have adequately pled a “pattern of racketeering activity” as 21 required for RICO. See, e.g., In re Outlaw Lab’y, LP Litig., No. 18-CV-840-GPC-BGS, 22 2020 WL 1953584, at *7 (S.D. Cal. Apr. 23, 2020). Accordingly, for the foregoing reasons, 23 the Court finds that Plaintiffs have adequately pled a RICO claim.6 24 25 6 Defendants additionally challenge the sufficiency of Plaintiffs’ RICO claim for failure to state the 26 element of “enterprise.” (Doc. No. 26 at 13.) However, because Defendants raise this argument for the first time in their reply brief, the Court need not consider it. See Zamani v. Carnes, 491 F.3d 990, 997 (9th 27 Cir. 2007) (“The district court need not consider arguments raised for the first time in a reply brief.”); Graves v. Arpaio, 623 F.3d 1043, 1048 (9th Cir. 2010) (“[A]rguments raised for the first time in a reply 28 1 8) Violations of 18 U.S.C. § 1962(d) 2 Defendants’ only challenge to Plaintiffs’ claim under the RICO conspiracy statute, 3 18 U.S.C. § 1962(d), rests on a finding that there is no substantive violation of RICO. 4 However, as previously discussed, Plaintiffs adequately asserted an underlying RICO 5 cause of action. See supra § III.7. Consequently, because Plaintiffs stated a RICO claim, 6 Defendants’ challenge against the RICO conspiracy claim fails. 7 9) Declaratory Relief 8 While federal courts do not have a duty to grant declaratory judgment, it may do so 9 in the exercise its discretion. Leadsinger, Inc. v. BMG Music Pub., 512 F.3d 522, 533 (9th 10 Cir. 2008). “[T]he question in each case is whether the facts alleged, under all the 11 circumstances, show that there is a substantial controversy, between parties having adverse 12 legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory 13 judgment.” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007). Additionally, 14 for a court to grant declaratory relief, “the actual controversy between the parties must 15 relate to a claim upon which relief can be granted.” CRV Imperial-Worthington, LP v. 16 Gemini Ins. Co., 770 F. Supp. 2d 1070, 1072–73 (S.D. Cal. 2011) (internal quotation marks 17 and citation omitted). 18 Plaintiffs request declaratory relief against Omni and LC Investment that “rental 19 guests under the UMA are entitled to access to the Resort on the same terms and conditions 20 as rental guests under the RMA.” (Doc. No. 1 at 36.) According to the complaint, the UMA 21 “is a separate agreement that owners must sign upon purchase.” (Id. at 4.) “The UMA 22 requires Plaintiffs to pay $100/night or 20% of their rental revenue, whichever is greater, 23 to Defendant LC Investment 2010, if they opt to rent their units outside of the RMA.” (Id.) 24 Plaintiffs allege that “[d]espite the fact that both the RMA and the UMA are silent as to 25 whether rental guests are given access to the Resort’s amenities, Omni has taken the 26 position in other litigation that only guests under the RMA are permitted to use the Resort’s 27 amenities.” (Id. at 18, 35) Plaintiffs further allege that “[t]he first villa owner to rent outside 28 of the RMA and only under the UMA, Matthew Palmer, has been granted Resort access 1 for his guests under the UMA.” (Id. at 38.) Additionally, the decision in the Erskine lawsuit 2 requires Erskine’s rental guests to “be granted Resort access under the UMA under the 3 same terms and conditions as guests under the RMA[.]” (Id.) 4 The complaint reveals that the parties disagree over whether rental guests under the 5 UMA are entitled access to Resort amenities. Although this issue has been resolved in the 6 Erksine lawsuit, Defendants continue to take the position that rental guests under the UMA 7 are only entitled to use amenities around the villa buildings, such as villa pools—not the 8 full Resort amenities. Defendants’ continued practice of prohibiting access to Resort 9 amenities frustrates Plaintiffs’ ability to exit the RMA. As such, Plaintiffs maintain that 10 consistent with Defendants’ pre-litigation practice on this issue and the findings in the 11 Erksine suit, the UMA guests must be granted access to Resort amenities on the same terms 12 and conditions as RMA guests. Assuming Plaintiffs’ allegations to be true, the Court finds 13 that there is a substantial actual controversy between the parties of sufficient immediacy 14 and reality to warrant the issuance of a declaratory judgment, and that the controversy 15 relates to the causes of action asserted in this case. See MedImmune, Inc., 549 U.S. at 127. 16 10) Unjust Enrichment 17 Defendants initially moved to dismiss Plaintiffs’ unjust enrichment cause of action, 18 but they have since withdrawn their motion. (Doc. No. 26 at 13.) As such, the Court need 19 not consider that motion. 20 11) Accounting 21 Plaintiffs assert that they have a right to accounting against Omni, LC Brokerage, 22 and LC Investment for profits improperly obtained by them. “An accounting is an equitable 23 proceeding which is proper where there is an unliquidated and unascertained amount owing 24 that cannot be determined without an examination of the debts and credits on the books to 25 determine what is due and owing.” Prakashpalan v. Engstrom, Lipscomb & Lack, 223 26 Cal.App.4th 1105, 1136–37 (2014). “Equitable principles govern, and the plaintiff must 27 show the legal remedy is inadequate.” Id. at 1137. Moreover, “[a]n action for accounting 28 is not available where the plaintiff alleges the right to recover a sum certain or a sum that 1 can be made certain by calculation.” Teselle v. McLoughlin, 173 Cal. App. 4th 156, 179 2 (2009). 3 Defendants argue that Plaintiffs fail to allege complexity of accounts justifying an 4 accounting, and that they fail to allege that the information they seek cannot be obtained 5 during the course of discovery. The Court agrees. The complaint is devoid of allegations 6 to show that a legal remedy is inadequate and that the monies sought cannot be ascertained 7 without an accounting action. See Prakashpalan, 223 Cal.App.4th at 1137; Teselle v. 8 McLoughlin, 173 Cal. App. 4th at 179. Accordingly, Plaintiffs’ accounting claim will be 9 DISMISSED WITH LEAVE TO AMEND. Inclusion of additional facts may cure the 10 aforementioned deficiency. See Fed. R. Civ. P. 15(a); Cook, 911 F.2d at 247. 11 Lastly, the Court notes that Plaintiffs’ opposition brief did not contest Defendants’ 12 motion to dismiss Ginsberg for failure to allege wrongful acts during her tenure as 13 broker-of-record for LC Brokerage from “April 2012 until March 2015.” (Doc. No. 1 at 5.) 14 Defendants also assert that all of Plaintiffs’ claims against Ginsberg are barred by their 15 respective statutes of limitation. As Plaintiffs failed to oppose this motion, the Court finds 16 that Plaintiffs have abandoned their claims against Ginsberg. See Qureshi v. Countrywide 17 Home Loans, Inc., No. 09–4198, 2010 WL 841669, at *6 n.2 (N.D. Cal. Mar. 10, 2010) 18 (deeming plaintiff’s failure to address, in opposition brief, claims challenged in a motion 19 to dismiss, an “abandonment of those claims”) (citing Jenkins v. Cnty. of Riverside, 398 20 F.3d 1093, 1095 n. 4 (9th Cir. 2005)); Sportscare of America, P.C. v. Multiplan, Inc., No. 21 2:10–4414, 2011 WL 589955, at *1 (D.N.J. Feb. 10, 2011) (“In most circumstances, failure 22 to respond in an opposition brief to an argument put forward in an opening brief constitutes 23 waiver or abandonment in regard to the uncontested issue.”). Accordingly, Defendant 24 Ginsberg will be DISMISSED from this action. 25 // 26 // 27 // 28 l IV. CONCLUSION 2 Based on the foregoing, the Court enters the following orders: 3 e Defendants’ motions to dismiss are GRANTED IN PART and DENIED IN 4 PART. (Doc. Nos. 19, 20.) 5 e Plaintiffs’ breach of contract claim against Omni is DISMISSED WITH 6 LEAVE TO AMEND. 7 e Plaintiffs’ intentional interference with contract claim against Omni is 8 DISMISSED WITHOUT LEAVE TO AMEND. 9 e Plaintiffs’ UCL claim under the unlawful prong is DISMISSED WITH LEAVE 10 TO AMEND. e Plaintiffs’ UCL claim under the fraud prong is DISMISSED WITH LEAVE 12 TO AMEND. 13 ° Plaintiffs’ accounting claim is DISMISSED WITH LEAVE TO AMEND. 14 e Defendant Ginsberg is DISMISSED from this action. 15 e Should Plaintiffs desire to amend their complaint, they must file a first amended 16 complaint no later than Friday, April 9, 2021. e Defendants must file a responsive pleading no later than April 23, 2021.
19 IT IS SO ORDERED. 20 Dated: March 29, 2021 © 21 Hon. Anthony J.Battaglia 22 United States District Judge 23 24 25 26 27 28