Ikuno v. Yip

912 F.2d 306, 1990 WL 118905
CourtCourt of Appeals for the Ninth Circuit
DecidedAugust 17, 1990
DocketNo. 89-35319
StatusPublished
Cited by48 cases

This text of 912 F.2d 306 (Ikuno v. Yip) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ikuno v. Yip, 912 F.2d 306, 1990 WL 118905 (9th Cir. 1990).

Opinion

EUGENE A. WRIGHT, Circuit Judge:

Appellant Ichiro Ikuno seeks the substance behind a phantom. He appeals the district court’s dismissal of his claims under the Commodities Exchange Act, RICO claims and pendent state claims against Li and other defendants allegedly involved in a fraudulent commodities trading corporation. We now AFFIRM in part, REVERSE in part, and REMAND.

BACKGROUND

Ichiro Ikuno and other investors were shown an attractive brochure describing the desirability of investing with King Lung Commodities, Ltd. (KLCL), the purported subsidiary of a multi-national conglomerate with its home offices in Hong Kong. The parent conglomerate, Continental King Lung Group, was described as being engaged in banking, insurance, real estate, construction, securities and commodities. The chairman of both entities was listed as Peter Yip.

Appellee Ka Li is the only appellee who has filed a brief on appeal. He is an attorney in Seattle, Washington and was responsible for the incorporation of KLCL in the state of Washington. He also filed two annual reports for KLCL in 1982 and 1983 and was involved in negotiation of a lease on behalf of KLCL. Although not an officer or director of KLCL, Li signed his name on the annual reports in a space designated for an officer or director’s signature and listed his title as “Attorney of the Corporation.” CR 73, Exhibit 18, 32.

The brochure shown to Ikuno informed that KLCL was one of the largest gold traders in the Far East and boasted, among other things, a 24-hour research department “with a point to point telex communications network.” KLCL was incorporated in Washington state.

Ikuno invested more than $70,000 in KLCL between 1982 and 1983. It proved to be a phantom corporation and, in January 1984, it shut down and its records were seized by the state. Two of its employees, Mark Chow and Tin On, pleaded guilty to unlawful selling of commodities and chairman Peter Yip, featured prominently in the brochure, disclaimed any knowledge of KLCL.

Ikuno obtained a state court judgment against KLCL for $265,800 and caused the sheriff to levy execution on all assets of KLCL. At the auction, Ikuno bought all claims of KLCL.

He brought this action, alleging violations of RICO and the Commodities Exchange Act as well as pendent state claims under the Washington Consumer Protection Act and legal negligence claims against appellee Li.

The case was originally assigned to Judge Voorhees who denied defendant Li’s motion for summary judgment. It was transferred to Judge McGovern who denied a motion for reconsideration of the denial of the summary judgment action. Both judges found that summary judgment was precluded by genuine issues of material fact.

The case was again transferred, this time to Judge Zilly. Defendants brought a second summary judgment motion that was virtually identical to the first. Judge Zilly granted it.

DISCUSSION

I. Standard of Review

We review de novo the grant of summary judgment, Kruso v. Int’l Tel. & Tel. Corp., 872 F.2d 1416, 1421 (9th Cir.1989).

[309]*309II. RICO Claims

It is unclear exactly what aspects of appellant Ikuno’s RICO claims the court found deficient. The transcript of the summary judgment oral argument proceeding indicates that the court granted summary judgment on the RICO claims because of two specific deficiencies: (1) failure to demonstrate that Li controlled KLCL within the meaning of § 1962(b); and (2) failure to demonstrate specific intent to defraud under § 1962(c). See CR 98 at 51. In its later order of March 29, 1989, however, the court stated also that Ikuno failed to demonstrate a causal link between his injuries and Li’s actions. See CR 109 at 3-5.

Additionally, Li now argues on appeal that Ikuno’s RICO claims are deficient because they fail to show a pattern of racketeering activity as required under 18 U.S.C. § 1962.

We address first the broader issues of pattern and causation before turning to the more narrow issues of control and specific intent requirements.

A. The Pattern Requirement

Although it is a close question, we conclude that Ikuno has met the “pattern” requirement.

The term “pattern of racketeering” has resisted easy definition.1 The Supreme Court has suggested that “continuity plus relationship” between the predicate acts “combines to produce a pattern,” and opined that Congress “had a fairly flexible concept of pattern in mind.” H.J. Inc. v. Northwestern Bell Tel. Co., — U.S. -, 109 S.Ct. 2893, 2900, 2907, 106 L.Ed.2d 195 (1989). The Court noted also that sporadic activity or widely separated and isolated criminal offenses would not form a pattern. Id. 109 S.Ct. at 2900.

We have adopted a test for pattern which inquires whether the predicate acts are sporadic or isolated. Sun Savings & Loan v. Dierdorff, 825 F.2d 187, 194 (9th Cir.1987). If they are isolated and sporadic, then they cannot form a “pattern.” Id. at 194.

Ikuno argues that a pattern was created by Li’s filing of two allegedly false annual reports. Although there is no talismanic number of predicate acts needed to establish a pattern, two acts is an accepted minimum. Northwestern Bell, 109 S.Ct. at 2899. Li’s actions thus could create a pattern because “Congress envisioned circumstances in which no more than two predicates would be necessary to establish a pattern of racketeering.” Id.

His actions also carried with them the threat of continuity. He was filing annual reports and there is no evidence that he would have stopped doing so if KLCL had not ceased to do business.

Being mindful that “RICO is to be read broadly,” Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 497, 105 S.Ct. 3275, 3285, 87 L.Ed.2d 346 (1985), we hold that sufficient evidence of a pattern was alleged to withstand a motion for summary judgment.

B. The Causation Requirement

Ikuno argues that the court improperly made factual findings about causation when it granted Li’s motion for summary judgment. We agree.

In its March 28, 1989 Order, the court said:

Li’s conduct did not cause plaintiff’s injuries. Instead, Ikuno’s injuries flowed from the conduct of other individuals associated with [KLCL],

CR 109 at 5.

It is difficult to understand how the court reached this summary conclusion given the factually complex nature of the case. It simply agreed with Li’s arguments that his role in KLCL’s operations was a very minor one. Those assertions, however, were hardly undisputed.

For example, the deposition of KLCL's Seattle Operations manager, Tin On, refutes Li’s contentions. He testified that [310]*310neither Li’s involvement in or knowledge of King Lung’s activities was limited:

Q Did you ever hear the name Ka Li? Mr. Li the attorney?
A Yeah.

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Bluebook (online)
912 F.2d 306, 1990 WL 118905, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ikuno-v-yip-ca9-1990.