Jerome Daroya v. Mary Josephine Daroya-Lushina

• Court: District Court, C.D. California
• Decided: August 16, 2022
• Docket: 2:22-cv-02695
• Status: Unknown

Opinion

Case 2:22-cv-02695-RSWL-JC Document 19 Filed 08/16/22 Page 1 of 13 Page ID #:97

1 'O' 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 JEROME DAROYA, C V 22-02695-RSWL-JC x ORDER re: Defendants’ 12 Plaintiff, Motion to Dismiss [13] 13 v. 14 MARY JOSEPHINE DAROYA- 15 LUSHINA; and DOMINICK RAMOS, 16 Defendants. 17 18 Plaintiff Jerome Daroya (“Plaintiff”) initiated 19 this Action [1] on April 22, 2022, against Defendants 20 Mary Josephine Daroya-Lushina and Dominick Ramos 21 (collectively, “Defendants”). Plaintiff brings a claim 22 against Defendants for violation of the Racketeer 23 Influenced and Corrupt Organizations Act (“RICO”), along 24 with state law claims for conversion, breach of 25 fiduciary duty, constructive trust, and violation of the 26 California Business and Professions Code. 27 Currently before the Court is Defendants’ Motion to 28 Dismiss (“Motion”) [13], made pursuant to Rules 12(b)(1) 1 Case 2:22-cv-02695-RSWL-JC Document 19 Filed 08/16/22 Page 2 of 13 Page ID #:98

1 and (6) of the Federal Rules of Civil Procedure. Having

2 reviewed all papers submitted pertaining to this Motion,

3 the Court NOW FINDS AND RULES AS FOLLOWS: the Court 4 GRANTS Defendant’s Motion with leave to amend. 5 I. BACKGROUND 6 A. Factual Background 7 The First Amended Complaint (“FAC”) alleges the 8 following: 9 Upon the death of their father, Plaintiff and 10 Defendant Mary Daroya-Lushina (“Daroya-Lushina”) 11 inherited a property located at 21610 South Perry 12 Street, Unit 15 in Carson, California (“the Property”). 13 FAC ¶ 10, ECF No. 12. On or about September 30, 2020, 14 Plaintiff and Daroya-Lushina created a limited liability 15 company known as Cookie and Kuya Enterprises, LLC 16 (“CKE”), to hold their joint interest in the Property. 17 Id. ¶¶ 10-11. Plaintiff and Daroya-Lushina each owned a 18 50% membership interest in CKE. Id. ¶ 11. 19 In 2021, Defendants jointly undertook a fraudulent 20 scheme to deprive Plaintiff of his interest in CKE, to 21 sell the Property, and to divert the proceeds from the 22 sale to themselves and away from Plaintiff. Id. ¶ 14. 23 On September 23, 2021, Ramos electronically filed a 24 fraudulent Statement of Information (“SOI”) with the 25 California Secretary of State. Id. ¶ 15. This SOI 26 contained numerous falsehoods, including an altered 27 mailing address for CKE and a statement that Daroya- 28 Lushina was its sole manager. Id. 2 Case 2:22-cv-02695-RSWL-JC Document 19 Filed 08/16/22 Page 3 of 13 Page ID #:99

1 Around the same time, Defendants contacted

2 Opendoor, a company that makes cash offers for

3 properties. Id. ¶ 17. Defendants submitted fraudulent 4 documents to Opendoor, including a copy of CKE’s 5 Operating Agreement showing that Plaintiff had a 5% 6 ownership interest in CKE rather than his actual 50% 7 ownership interest. Id. ¶ 19. Defendants submitted 8 further documentation suggesting that Plaintiff had 9 surrendered all interest in CKE. Id. Daroya-Lushina 10 proceeded to sell the Property to Opendoor for $496,000 11 and did not provide any share of the proceeds to 12 Plaintiff. Id. ¶¶ 21-22. 13 Additionally, Daroya-Lushina falsely identified 14 herself as the sole officer and director of Jose K. 15 Daroya, CPA APC (“APC”), a company created by their 16 father prior to his passing. Id. ¶¶ 24-25. Defendants 17 allegedly obtained at least $16,879 through a Paycheck 18 Protection Program loan and $86,000 in Economic Injury 19 Disaster Loans on behalf of APC. Id. ¶ 25. Lenders are 20 now seeking to collect payments for these loans from 21 Plaintiff and his associated businesses. Id. Lastly, 22 Defendants attempted to fraudulently obtain a loan in 23 the name of one of Plaintiff’s business clients, causing 24 the client to terminate his business relationship with 25 Plaintiff. Id. ¶ 26. 26 B. Procedural Background 27 Plaintiff filed his Complaint [1] on April 22, 28 2022, and filed his FAC [12] on June 20, 2022. The FAC 3 Case 2:22-cv-02695-RSWL-JC Document 19 Filed 08/16/22 Page 4 of 13 Page ID #:100

1 asserts claims against Defendants for: (1) civil RICO

2 violations; (2) conversion (against Daroya-Lushina

3 only); (3) breach of fiduciary duty; (4) violations of 4 California Business and Professions Code; and (5) 5 constructive trust. 6 Defendants filed the instant Motion to Dismiss [13] 7 on July 11, 2022. Plaintiff opposed [16] the Motion on 8 July 26, 2022. Defendants replied [17] on August 2, 9 2022. 10 II. DISCUSSION 11 A. Legal Standard 12 1. Rule 12(b)(6) 13 Rule 12(b)(6) of the Federal Rules of Civil 14 Procedure allows a party to move for dismissal of one or 15 more claims if the pleading fails to state a claim upon 16 which relief can be granted. Fed. R. Civ. P. 12(b)(6). 17 A complaint must “contain sufficient factual matter, 18 accepted as true, to ‘state a claim to relief that is 19 plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 20 662, 678 (2009) (citation omitted). Dismissal is 21 warranted for “lack of a cognizable legal theory or the 22 absence of sufficient facts alleged under a cognizable 23 legal theory.” Balistreri v. Pacifica Police Dep’t, 901 24 F.2d 696, 699 (9th Cir. 1988) (citation omitted). 25 In ruling on a 12(b)(6) motion, a court may 26 generally consider only allegations contained in the 27 pleadings, exhibits attached to the complaint, and 28 matters properly subject to judicial notice. Swartz v. 4 Case 2:22-cv-02695-RSWL-JC Document 19 Filed 08/16/22 Page 5 of 13 Page ID #:101

1 KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007). A court

2 must presume that all material allegations in the

3 complaint are true and construe them in the light most 4 favorable to the plaintiff. Klarfeld v. United States, 5 944 F.2d 583, 585 (9th Cir. 1991). While a complaint 6 need not contain detailed factual allegations, a 7 plaintiff must provide more than “labels and 8 conclusions” or “a formulaic recitation of the elements 9 of a cause of action.” Bell Atl. Corp. v. Twombly, 550 10 U.S. 544, 555 (2007). The question is not whether the 11 plaintiff will ultimately prevail, but whether the 12 plaintiff is entitled to present evidence to support the 13 claims. Jackson v. Birmingham Bd. of Educ., 544 U.S. 14 167, 184 (2005) (quoting Scheuer v. Rhodes, 416 U.S. 15 232, 236 (1974)). 16 2. Rule 12(b)(1) 17 Rule 12(b)(1) of the Federal Rules of Civil 18 Procedure allows a litigant to seek dismissal of an 19 action for lack of subject matter jurisdiction. Under 20 28 U.S.C. § 1367, a court has supplemental jurisdiction 21 over all claims that form part of the same case or 22 controversy as claims over which the court has original 23 jurisdiction. However, a district court may decline to 24 exercise supplemental jurisdiction over a state law 25 claim when all claims over which it has original 26 jurisdiction have been dismissed. 28 U.S.C. 27 § 1367(c)(3). This decision should be informed by the 28 values of economy, convenience, fairness, and comity. 5 Case 2:22-cv-02695-RSWL-JC Document 19 Filed 08/16/22 Page 6 of 13 Page ID #:102

1 United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 726

2 (1996).

3 B. Analysis 4 1. RICO Claim 5 The RICO statute makes it unlawful for any person 6 to conduct or participate in an enterprise’s affairs 7 through a pattern of racketeering activity. 18 U.S.C. 8 § 1962(c). To state a claim under RICO, Plaintiff must 9 allege facts establishing: “(1) conduct (2) of an 10 enterprise (3) through a pattern (4) of racketeering 11 activity (known as ‘predicate acts’) (5) causing injury 12 to plaintiff’s ‘business or property.’” Living Designs, 13 Inc. v. E.I. Dupont de Nemours & Co., 431 F.3d 353, 361 14 (9th Cir. 2005) (quoting Grimmett v. Brown, 75 F.3d 506, 15 510 (9th Cir. 1996)). 16 Defendants argue that Plaintiff’s RICO claim must 17 be dismissed because the FAC fails to allege: (1) the 18 requisite predicate acts; (2) a pattern of racketeering 19 activity; (3) the existence of an enterprise; and (4) a 20 cognizable RICO injury. See Defs.’ Mem. P. & A. in 21 Supp. of Mot. to Dismiss (“Mot.”) 3:11-8:10, ECF No. 13- 22 1. The Court finds that Plaintiff’s RICO claim fails 23 because the FAC fails to allege a cognizable RICO injury 24 that was proximately caused by a pattern of predicate 25 acts. The Court therefore GRANTS Defendant’s Motion as 26 to Plaintiff’s RICO cause of action. 27 a. Enterprise 28 An “enterprise” includes “any individual, 6 Case 2:22-cv-02695-RSWL-JC Document 19 Filed 08/16/22 Page 7 of 13 Page ID #:103

1 partnership, corporation, association, or other legal

2 entity, and any union or group of individuals associated

3 in fact although not a legal entity.” 18 U.S.C. 4 § 1961(4). “Under RICO, two types of associations meet 5 the definition of enterprise: The first encompasses 6 organizations such as corporations and partnerships, and 7 other legal entities. The second covers any union or 8 group of individuals associated in fact although not a 9 legal entity.” Shaw v. Nissan N. Am., Inc., 220 F. 10 Supp. 3d 1046, 1053 (C.D. Cal. 2016) (internal quotation 11 marks omitted) (quoting United States v. Turkette, 452 12 U.S. 576, 581–82 (1981)). 13 Here, Plaintiff argues that the FAC alleges two 14 distinct enterprises. See Opp’n 9:13-14, ECF No. 16. 15 First, it alleges that Daroya-Lushina and Ramos 16 “infiltrated and acted through CKE.” Id. at 9:13-15. 17 Second, it alleges that an association-in-fact 18 enterprise existed between Daroya-Lushina, Ramos, CKE, 19 APC, and potentially others. Id. at 9:22-25. The Court 20 analyzes the allegations pertaining to each potential 21 enterprise in turn. 22 With regard to Defendants’ alleged infiltration of 23 CKE, the Court finds that Plaintiff has adequately 24 alleged the existence of an enterprise. A RICO 25 enterprise must be “an entity separate and apart from 26 the pattern of [racketeering] activity in which it 27 engages.” Turkette, 452 U.S. at 583. The FAC describes 28 CKE as a legitimate LLC, which Defendants infiltrated 7 Case 2:22-cv-02695-RSWL-JC Document 19 Filed 08/16/22 Page 8 of 13 Page ID #:104

1 and conducted through a pattern of racketeering

2 activity. See FAC ¶ 15. CKE therefore existed

3 separately from the alleged racketeering activity for 4 which it was used, and thus constitutes a RICO 5 enterprise. See United Energy Owners Comm., Inc. v. 6 U.S. Energy Mgmt. Sys., Inc., 837 F.2d 356, 362-64 (9th 7 Cir. 1988). 8 As for the alleged association-in-fact enterprise, 9 however, Plaintiff’s allegations are insufficient. An 10 association-in-fact enterprise is “a group of persons 11 associated together for a common purpose of engaging in 12 a course of conduct.” Turkette, 452 U.S. at 583. The 13 enterprise must have some sort of structure or 14 framework, meaning there must be “relationships among 15 those associated with the enterprise.” Boyle v. United 16 States, 556 U.S. 938, 946 (2009). Here, the FAC does 17 not allege any relationship between CKE and APC. While 18 Plaintiff alleges that Daroya-Lushina and Ramos used 19 both entities to commit racketeering activity, the acts 20 involving each entity were completely unrelated to one 21 another. The two companies therefore had no common 22 purpose, and they were not associated together to form 23 “a vehicle for the commission of two or more predicate 24 acts.” See Odom v. Microsoft Corp., 486 F.3d 541, 552 25 (9th Cir. 2007). Plaintiff therefore fails to allege 26 the existence of an association-in-fact enterprise. 27 Because Plaintiff has sufficiently alleged the 28 existence of an enterprise through CKE only, the Court 8 Case 2:22-cv-02695-RSWL-JC Document 19 Filed 08/16/22 Page 9 of 13 Page ID #:105

1 analyzes the predicate acts discussed in the FAC

2 pertaining solely to CKE.

3 b. Injury Caused by Predicate Acts 4 A RICO claim requires a pattern of two or more 5 predicate acts that cause injury to the plaintiff’s 6 business or property. Living Designs, 431 F.3d at 361. 7 A predicate act is “any act indictable under any of the 8 statutory provisions listed in 18 U.S.C. § 1961(1).” In 9 re Toyota Motor Corp., 785 F. Supp. 2d 883, 918 (C.D. 10 Cal. 2011). Here, the predicate acts Plaintiff alleges 11 are mail fraud in violation of 18 U.S.C. § 1341 and wire 12 fraud in violation of 18 U.S.C. § 1343. See FAC ¶ 36. 13 Plaintiff alleges that Defendants committed mail 14 and wire fraud through the CKE enterprise for 15 essentially two purposes. First, Ramos engaged in a 16 single act of wire fraud to falsely identify Daroya- 17 Lushina as the sole manager of CKE. FAC ¶ 15. Second, 18 Defendants jointly engaged in mail or wire fraud to sell 19 the Property, which was CKE’s main asset, and to collect 20 the proceeds of the sale for themselves. Id. ¶¶ 19, 21. 21 In turn, Plaintiff suffered two distinct injuries. The 22 first act of wire fraud deprived Plaintiff of his 23 rightful interest in CKE. Id. ¶ 14. The sale of the 24 Property deprived Plaintiff of his rightful share in the 25 proceeds of the sale. Id. 26 While Plaintiff’s first injury — loss of membership 27 interest in CKE — may be a cognizable RICO injury, this 28 harm arose from a single act of wire fraud. A single 9 Case 2:22-cv-02695-RSWL-JC Document 19 Filed 08/16/22 Page 10 of 13 Page ID #:106

1 predicate act is insufficient to establish a pattern of

2 racketeering activity. 18 U.S.C. § 1961(5) (“[A]

3 ‘pattern of racketeering activity’ requires at least two 4 acts of racketeering activity.”). Thus, the merit of 5 Plaintiff’s RICO claim turns on whether Plaintiff has 6 alleged that Defendants’ other predicate acts — related 7 to the sale of the Property — caused a cognizable RICO 8 injury. The Court concludes that Plaintiff has not, and 9 Plaintiff’s RICO claim therefore fails. Because this 10 conclusion is dispositive, the Court does not reach 11 Defendants’ other arguments as to the merits of the RICO 12 claim. 13 To allege a cognizable RICO injury, Plaintiff must 14 show “a harm to a specific business or property 15 interest” that was caused directly by Defendants’ RICO 16 violation. In re ZF-TRW Airbag Control Units Prods. 17 Liab. Litig., No. LA ML19-02905 JAK (FFMx), 2022 WL 18 522484, at *59-60 (C.D. Cal. Feb. 9, 2022) (citations 19 omitted). Here, Plaintiff alleges that Defendants’ sale 20 of the Property deprived Plaintiff of his rightful share 21 in the sale’s proceeds. FAC ¶ 14. Plaintiff argues 22 that because he has a 50% ownership interest in CKE, he 23 is entitled to at least 50% of the proceeds from the 24 sale of CKE’s main asset. Opp’n 10:8-13. 25 Under California law, however, “members of [an] LLC 26 hold no direct ownership interest in the company’s 27 assets.” PacLink Commc’ns Int’l, Inc. v. Superior Ct., 28 109 Cal. Rptr. 2d 436, 440 (Cal. Ct. App. 2001). Thus, 10 Case 2:22-cv-02695-RSWL-JC Document 19 Filed 08/16/22 Page 11 of 13 Page ID #:107

1 “the members cannot be directly injured when the company

2 is improperly deprived of those assets.” Id. That

3 deprivation “constitutes an injury to the company 4 itself,” and any action brought by an individual member 5 must be derivative in nature on the company’s behalf. 6 Id. Here, Plaintiff’s alleged deprivation of his fair 7 share of the proceeds is only incidental to the injury 8 caused to CKE itself. See PacLink, 109 Cal. Rptr. 2d at 9 441. Because the injury alleged in the FAC was one to 10 the LLC and not to Plaintiff directly, Plaintiff lacks 11 standing to assert it. See Sparling v. Hoffman Const. 12 Co., Inc., 864 F.2d 635, 640-41 (9th Cir. 1988) 13 (concluding that shareholder plaintiff lacked RICO 14 standing where RICO claims were based on injury to 15 corporation). Plaintiff has therefore failed to assert 16 a cognizable RICO injury caused by the predicate acts 17 committed by Defendants in selling the Property. 18 In sum, while Plaintiff may have properly alleged 19 the existence of an enterprise and the requisite number 20 of predicate acts, Plaintiff has failed to allege that 21 those acts caused harm to Plaintiff’s business or 22 property. Plaintiff therefore fails to state a civil 23 RICO claim, and the Court GRANTS Defendant’s Motion. 24 2. Supplemental Jurisdiction 25 Defendants further request that the Court decline 26 to exercise supplemental jurisdiction over Plaintiff’s 27 state law claims. Mot. 9:15-16. A district court may 28 decline to exercise supplemental jurisdiction over state 11 Case 2:22-cv-02695-RSWL-JC Document 19 Filed 08/16/22 Page 12 of 13 Page ID #:108

1 law claims where the court has dismissed all claims over

2 which it has original jurisdiction. 28 U.S.C.

3 § 1367(c)(3). “[I]f the federal claims are dismissed 4 before trial . . . the state claims should be dismissed 5 as well.” United Mine Workers of Am. v. Gibbs, 383 U.S. 6 715, 726 (1966). 7 Here, Plaintiff’s second through fifth causes of 8 action are state law claims within the Court’s 9 discretionary supplemental jurisdiction. Because 10 Plaintiff’s only federal claim is subject to dismissal, 11 the Court declines to address the Motion’s arguments as 12 to Plaintiff’s conversion claim. If Plaintiff does not 13 amend the FAC to properly state a federal claim for 14 relief, the Court will dismiss the remaining state law 15 claims. See Nguyen v. Global Equip. Servs. & Mfg., 16 Inc., No. 18-cv-01824-NC, 2018 WL 10758158, at *6 (N.D. 17 Cal. Oct. 2, 2018). 18 3. Leave to Amend 19 “The court should give leave [to amend] freely when 20 justice so requires.” Fed. R. Civ. P. 15(a)(2). “Rule 21 15’s policy of favoring amendments to pleadings should 22 be applied with ‘extreme liberality.’” United States v. 23 Webb, 655 F.2d 977, 979 (9th Cir. 1981). Against this 24 extremely liberal standard, the Court may consider “the 25 presence of any of four factors: bad faith, undue delay, 26 prejudice to the opposing party, and/or futility.” 27 Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 28 712 (9th Cir. 2001). 12 Case 2:22-cv-02695-RSWL-JC Document 19 Filed 08/16/22 Page 13 of 13 Page ID #:109

1 Here, Plaintiff requests leave to amend to cure the

2 FAC’s deficiencies and to allege facts related to

3 “further fraudulent actions” that may support a civil 4 RICO claim. See Opp’n 1:6-9. It is possible that 5 Plaintiff could allege new facts to cure the 6 deficiencies outlined above. The Court therefore 7 dismisses Plaintiff’s RICO claim with leave to amend. 8 III. CONCLUSION 9 Based on the foregoing, the Court GRANTS 10 Defendants’ Motion as to Plaintiff’s RICO claim with 11 leave to amend. Plaintiff may file a Second Amended 12 Complaint to cure the deficiencies outlined above within 13 thirty (30) days of this Order. Because the only 14 federal claim is subject to dismissal, the Court 15 declines to address the merits of Plaintiff’s state law 16 causes of action. 17 IT IS SO ORDERED. 18 19 DATED: August 16, 2022 ______/_s/_ R_o_n_a_ld_ S_.W__. _Le_w________ HONORABLE RONALD S.W. LEW 20 Senior U.S. District Judge 21 22 23 24 25 26 27 28 13