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1 'O' JS-6 2 3 4 5 6 7 10 11 CV 22-02695-RSWL-JC x
13 Plaintiff, ORDER re: Defendants’ 14 v. Motion to Dismiss [23] 15 MARY JOSEPHINE DAROYA- 16 LUSHINA; and DOMINICK RAMOS, 17 Defendants. 18 19 20 Plaintiff Jerome Daroya (“Plaintiff”) initiated 21 this Action [1] on April 22, 2022, against Defendants 22 Mary Josephine Daroya-Lushina and Dominick Ramos 23 (collectively, “Defendants”). Plaintiff brings a claim 24 against Defendants for violation of the Racketeer 25 Influenced and Corrupt Organizations Act (“RICO”), along 26 with state law claims for conversion, breach of 27 fiduciary duty, intentional interference with 28 prospective economic advantage, constructive trust, and 1 Case 2:22-cv-02695-RSWL-JC Document 29 Filed 12/12/22 Page 2 of 23 Page ID #:204
1 violation of the California Business and Professions
2 Code. Currently before the Court is Defendants’ Motion
3 to Dismiss and Motion to Strike (“Motion”) [23], made 4 pursuant to Rules 12(b)(1), (6), and 12(f) of the 5 Federal Rules of Civil Procedure.1 6 Having reviewed all papers submitted pertaining to 7 this Motion, the Court NOW FINDS AND RULES AS FOLLOWS: 8 the Court GRANTS Defendants’ Motion to Strike the new 9 plaintiffs and claims added in the SAC and GRANTS 10 Defendant’s Motion to Dismiss as to Plaintiff’s RICO 11 claim without leave to amend. Because the only federal 12 claim is subject to dismissal, the Court declines to 13 address the merits of Plaintiff’s state law causes of 14 action. 16 A. Factual Background 17 Plaintiff Daroya alleges the following in his Second 18 Amended Complaint (“SAC”): 19 Upon the death of their father, Plaintiff Daroya 20 and Defendant Mary Daroya-Lushina (“Daroya-Lushina”) 21
22 1 Plaintiffs argue that Defendant violated Rule 7-3 because “Defendants’ counsel did not even attempt to meet and confer with 23 Plaintiffs’ counsel until October 6, 2022 . . . .” Plfs.’ Opp’n to Defs’ Mot. to Dismiss Plfs’ Second Am. Compl. (“Opp’n”) 6:21- 24 23, ECF No. 26. Regardless of whether this constituted a violation of Rule 7-3, Plaintiffs were clearly not prejudiced 25 because they were able to fully respond to Defendants’ Motion. 26 See generally Opp’n. Thus, the Court exercises its discretion to consider the Motion’s merits. See CarMax Auto Superstores Cal. 27 LLC v. Hernandez, 94 F. Supp. 3d 1078, 1088 (C.D. Cal. 2015). 28 2 Case 2:22-cv-02695-RSWL-JC Document 29 Filed 12/12/22 Page 3 of 23 Page ID #:205
1 inherited a property located at 21610 South Perry
2 Street, Unit 15 in Carson, California (“the Property”).
3 SAC ¶ 16, ECF No. 20. On or about September 30, 2020, 4 Plaintiff Daroya and Defendant Daroya-Lushina created a 5 limited liability company known as Cookie and Kuya 6 Enterprises, LLC (“CKE”), to hold their joint interest 7 in the Property. Id. ¶¶ 16-17. Plaintiff Daroya and 8 Defendant Daroya-Lushina each owned a 50% membership 9 interest in CKE. Id. ¶ 17. 10 In 2021, Defendants jointly undertook a fraudulent 11 scheme to deprive Plaintiff Daroya of his interest in 12 CKE, to sell the Property, and to divert the proceeds 13 from the sale to themselves and away from Plaintiff. 14 Id. ¶ 21. On September 23, 2021, Ramos electronically 15 filed a fraudulent Statement of Information with the 16 California Secretary of State. Id. ¶ 23. This 17 Statement of Information contained numerous falsehoods, 18 including an altered mailing address for CKE and a 19 statement that Defendant Daroya-Lushina was its sole 20 manager. Id. 21 Around the same time, Defendants contacted 22 Opendoor, a company that makes cash offers for 23 properties. Id. ¶¶ 25-26. Defendants submitted 24 fraudulent documents to Opendoor, including a copy of 25 CKE’s Operating Agreement showing that Plaintiff Daroya 26 had a 5% ownership interest in CKE rather than his 27 actual 50% ownership interest. Id. ¶¶ 27-28. 28 Defendants submitted further documentation suggesting 3 Case 2:22-cv-02695-RSWL-JC Document 29 Filed 12/12/22 Page 4 of 23 Page ID #:206
1 that Plaintiff Daroya had surrendered all interest in
2 CKE. Id. Defendant Daroya-Lushina proceeded to sell
3 the Property to Opendoor for $496,000 and did not 4 provide any share of the proceeds to Plaintiff. Id. 5 ¶¶ 30-31. 6 Additionally, Defendant Daroya-Lushina falsely 7 identified herself as the sole officer and director of 8 Jose K. Daroya, CPA APC (“APC”), a company created by 9 their father prior to his passing. Id. ¶¶ 34. 10 Defendants allegedly obtained at least $16,879 through a 11 Paycheck Protection Program loan and $86,000 in Economic 12 Injury Disaster Loans on behalf of APC. Id. ¶ 33. 13 Lenders are now seeking to collect payments for these 14 loans from Plaintiff Daroya and his associated 15 businesses. Id. ¶ 34. Defendants also attempted to 16 fraudulently obtain a loan in the name of one of 17 Plaintiff Daroya’s business clients, causing the client 18 to terminate his business relationship with Plaintiff. 19 Id. ¶ 35. 20 Lastly, Defendant Daroya-Lushina falsely identified 21 herself as the sole director and officer of JLA, a 22 financial services firm owned by several shareholders, 23 including Plaintiff Daroya and Defendant Daroya-Lushina. 24 Id. ¶¶ 14, 36. Defendant Daroya-Lushina also changed 25 JLA’s mailing address to her own address, and received 26 checks made payable to JLA. Id. ¶¶ 36-38. Defendants 27 then forged endorsements on these checks and deposited 28 them into their own accounts. Id. ¶ 38. Plaintiff 4 Case 2:22-cv-02695-RSWL-JC Document 29 Filed 12/12/22 Page 5 of 23 Page ID #:207
1 Daroya discovered that Defendants accessed JLA’s website
2 through the electronic submission of false information,
3 changed the name of JLA’s website, and changed access 4 passwords to prevent Plaintiff Daroya and others from 5 accessing the site. Id. ¶ 39. 6 B. Procedural Background 7 Plaintiff Daroya filed his Complaint [1] on 8 April 22, 2022, and filed his FAC [12] on June 20, 2022. 9 Defendants filed a Motion to Dismiss [13] on July 11, 10 2022, which this Court granted [19] with leave to amend 11 on August 16, 2022. Plaintiff then filed his SAC [20] 12 on September 16, 2022. Defendants filed the instant 13 Motion [23] on October 10, 2022. Plaintiff opposed [26] 14 the Motion on October 18, 2022, and Defendants replied 15 [27] on October 24, 2022. 17 A. Legal Standard 18 1. Rule 12(f) Motion to Strike 19 Rule 12(f) provides that a court may, by motion or 20 on its own initiative, “strike from a pleading an 21 insufficient defense or any redundant, immaterial, 22 impertinent, or scandalous matter.” Fed. R. Civ. P. 23 12(f). “The function of a 12(f) motion to strike is to 24 avoid the expenditure of time and money that must arise 25 from litigating spurious issues by dispensing with those 26 issues prior to trial.” Whittlestone, Inc. v. Handi- 27 Craft Co., 618 F.3d 970, 973 (9th Cir. 2010) (quoting 28 Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir. 5 Case 2:22-cv-02695-RSWL-JC Document 29 Filed 12/12/22 Page 6 of 23 Page ID #:208
1 1993), rev’d on other grounds, 510 U.S. 517 (1994)).
2 “Motions to strike are generally disfavored.” Leghorn
3 v. Wells Fargo Bank, N.A., 950 F. Supp. 2d 1093, 1122 4 (N.D. Cal. 2013) (citation omitted); see also Sapiro v. 5 Encompass Ins., 221 F.R.D. 513, 518 (N.D. Cal. 2004) 6 (“Courts have long disfavored Rule 12(f) motions, 7 granting them only when necessary to discourage parties 8 from making completely tendentious or spurious 9 allegations.”). 10 “In ruling on a motion to strike under Rule 12(f), 11 the court must view the pleading in the light most 12 favorable to the nonmoving party.” Cholakyan v. 13 Mercedes-Benz USA, LLC, 796 F. Supp. 2d 1220, 1245 (C.D. 14 Cal. 2011). “[B]efore granting such a motion . . . , 15 the court must be satisfied that there are no questions 16 of fact, that the [claim or] defense is insufficient as 17 a matter of law, and that under no circumstance could 18 [it] succeed.” Id. (citing Tristar Pictures, Inc. v. 19 Del Taco, Inc., No. CV 99–07655 DDP(Ex), 1999 WL 20 33260839, at *1 (C.D. Cal. Aug. 31, 1999)). “[C]ourts 21 frequently require the moving party to demonstrate 22 prejudice before granting the requested relief, and 23 ultimately whether to grant a motion to strike falls on 24 the sound discretion of the district court.” Cook v. 25 County of Los Angeles, No. CV 19-2417 JVS (KLSx), 2021 26 WL 1502704, at *2 (C.D. Cal. Mar. 31, 2021) (internal 27 quotation marks and citation omitted). 28 /// 6 Case 2:22-cv-02695-RSWL-JC Document 29 Filed 12/12/22 Page 7 of 23 Page ID #:209
1 2. Rule 12(b)(6) Motion to Dismiss 2 Rule 12(b)(6) of the Federal Rules of Civil
3 Procedure allows a party to move for dismissal of one or 4 more claims if the pleading fails to state a claim upon 5 which relief can be granted. Fed. R. Civ. P. 12(b)(6). 6 A complaint must “contain sufficient factual matter, 7 accepted as true, to ‘state a claim to relief that is 8 plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 9 662, 678 (2009) (citation omitted). Dismissal is 10 warranted for “lack of a cognizable legal theory or the 11 absence of sufficient facts alleged under a cognizable 12 legal theory.” Balistreri v. Pacifica Police Dep’t, 901 13 F.2d 696, 699 (9th Cir. 1988) (citation omitted). 14 In ruling on a 12(b)(6) motion, a court may 15 generally consider only allegations contained in the 16 pleadings, exhibits attached to the complaint, and 17 matters properly subject to judicial notice. Swartz v. 18 KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007). A court 19 must presume that all material allegations in the 20 complaint are true and construe them in the light most 21 favorable to the plaintiff. Klarfeld v. United States, 22 944 F.2d 583, 585 (9th Cir. 1991). While a complaint 23 need not contain detailed factual allegations, a 24 plaintiff must provide more than “labels and 25 conclusions” or “a formulaic recitation of the elements 26 of a cause of action.” Bell Atl. Corp. v. Twombly, 550 27 U.S. 544, 555 (2007). The question is not whether the 28 plaintiff will ultimately prevail, but whether the 7 Case 2:22-cv-02695-RSWL-JC Document 29 Filed 12/12/22 Page 8 of 23 Page ID #:210
1 plaintiff is entitled to present evidence to support the
2 claims. Jackson v. Birmingham Bd. of Educ., 544 U.S.
3 167, 184 (2005) (quoting Scheuer v. Rhodes, 416 U.S. 4 232, 236 (1974)). 5 3. Rule 12(b)(1) Motion to Dismiss 6 Rule 12(b)(1) of the Federal Rules of Civil 7 Procedure allows a litigant to seek dismissal of an 8 action for lack of subject matter jurisdiction. Under 9 28 U.S.C. § 1367, a court has supplemental jurisdiction 10 over all claims that form part of the same case or 11 controversy as claims over which the court has original 12 jurisdiction. However, a district court may decline to 13 exercise supplemental jurisdiction over a state law 14 claim when all claims over which it has original 15 jurisdiction have been dismissed. 28 U.S.C. 16 § 1367(c)(3). This decision should be informed by the 17 values of economy, convenience, fairness, and comity. 18 United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 726 19 (1996). 20 B. Analysis 21 1. Motion to Strike 22 The Court granted Defendants’ previous motion to 23 dismiss with leave to amend, and Plaintiff Daroya 24 submitted a Second Amended Complaint (“SAC”) shortly 25 thereafter. Plaintiff amended his Complaint to alter 26 the preexisting claims and to add three new plaintiffs, 27 a RICO conspiracy claim, two more conversion claims, and 28 an interference with prospective economic advantage 8 Case 2:22-cv-02695-RSWL-JC Document 29 Filed 12/12/22 Page 9 of 23 Page ID #:211
1 claim. See generally SAC. Defendants argue that these
2 new parties and allegations are “outside the scope of
3 the Court’s Order and an impermissible attempt to change 4 factual allegations without leave of Court as required 5 under Rule 15.” Mem. of P. & A. in Supp. of Defs.’ Mot. 6 to Dismiss and to Strike (“Mem.”), 4:3-9, ECF No. 23-1. 7 In response, Plaintiff Daroya argues that adding 8 additional plaintiffs cured the deficient RICO claim, 9 and thus falls within the scope of the Court’s August 10 16, 2022 Order. Opp’n 7:13-8:12. Nonetheless, 11 Plaintiffs concede that, “[a]dmittedly, Plaintiffs 12 should have filed a motion requesting leave from the 13 Court to add additional claims,” but contend that their 14 failure to request leave “was harmless and should not 15 lead to dismiss of the claims.” Id. 8:9-12. 16 Federal Rule of Civil Procedure 15(a)(1) provides 17 that a party may amend its pleading once as a matter of 18 course within “(A) [twenty-one] days after serving it, 19 or (B) if the pleading is one to which a responsive 20 pleading is required, [twenty-one] days after service of 21 a responsive pleading or [twenty-one] days after service 22 of a motion under Rule 12(b), (e), or (f), whichever is 23 earlier.” Plaintiff filed his initial Complaint in 24 April 2022, and more than twenty-one days have passed 25 since Plaintiff served Defendants in May 2022. See 26 generally Compl., ECF No 1; Proof of Service Upon Def. 27 Mary Josephine Daroya-Lushina, ECF No. 9; Proof of 28 Service Upon Def. Dominick Ramos, ECF No. 10. Plaintiff 9 Case 2:22-cv-02695-RSWL-JC Document 29 Filed 12/12/22 Page 10 of 23 Page ID #:212
1 then filed a First Amended Complaint in June 2022,
2 before Defendants filed their initial Motion to Dismiss
3 in July 2022. See generally First Am. Compl., ECF 4 No. 12; Defs.’ Mot. to Dismiss Pl.’s First Am. Compl., 5 ECF No. 13. Since Plaintiff has already amended his 6 Complaint once as a matter of course, he requires leave 7 of this Court for further amendments. 8 In Wehlage v. EmpRes Healthcare Incorporated, the 9 court granted the defendants’ initial motion to dismiss 10 with leave to amend, directing the plaintiff to only 11 “add alter ego allegations” to one specific claim to 12 show she had standing. 821 F. Supp. 2d 1122, 1125 13 (N.D. Cal. 2011). The plaintiff proceeded to amend her 14 complaint to add new plaintiffs and defendants. Id. 15 There, the court held that the plaintiff, who could no 16 longer amend as a matter of course under Rule 15, had 17 exceeded the scope of the court’s order. Id. 18 Accordingly, the court granted the defendants’ motion to 19 strike the added parties and claims. Id. 20 Similarly, in Gerritson v. Warner Brothers 21 Entertainment Incorporated, the court dismissed the 22 plaintiff’s claim with leave to amend to remedy 23 specified deficiencies in her preexisting claims. 24 116 F. Supp. 3d 1104, 1110-19, 1123-25 (C.D. Cal. 2015). 25 The plaintiff thereafter amended her complaint to 26 include new claims, which the court dismissed as 27 exceeding the scope of its order. Id. at 1124-25; see, 28 e.g., DeLeon v. Wells Fargo Bank, N.A., No. 10–CV–01390– 10 Case 2:22-cv-02695-RSWL-JC Document 29 Filed 12/12/22 Page 11 of 23 Page ID #:213
1 LHK, 2010 WL 4285006, *3 (N.D. Cal. Oct. 22, 2010) (“In
2 cases like this one . . . where leave to amend is given
3 to cure deficiencies in certain specified claims, courts 4 have agreed that new claims alleged for the first time 5 in the amended pleading should be dismissed or 6 stricken”); Kennedy v. Full Tilt Poker, No. CV 09–07964 7 MMM (AGRx), 2010 WL 3984749, *1 (C.D. Cal. Oct. 12, 8 2010) (noting that the court had stricken a third 9 amended complaint because plaintiffs' new claims and the 10 addition of new defendants “exceeded the authorization 11 to amend the court granted” and plaintiffs had not 12 sought leave to add new claims or defendants as required 13 by Rule 15). 14 In its August 16, 2022 Order, the Court granted 15 Plaintiff leave to amend his RICO claim and instructed 16 that Plaintiff “could allege new facts to cure the 17 deficiencies” in his RICO claim. See Order Granting 18 Defs.’ Mot. to Dismiss Plf’s First Am. Compl. (“Order”) 19 12:19-13:7, ECF No. 19. Just as in Wehlage and 20 Gerritsen, Plaintiff was not granted leave to add new 21 parties and claims to his action and is attempting to 22 amend his Complaint without leave of the Court. 23 Plaintiff, however, contends that adding new plaintiffs 24 is tantamount to alleging new facts to cure his lack of 25 standing. Opp’n 7:13-8:12. But this interpretation of 26 the August 16, 2022 Order and the meaning of “allege new 27 facts,” is too much of a stretch. Had the Court 28 intended to grant Plaintiff leave to add new parties, 11 Case 2:22-cv-02695-RSWL-JC Document 29 Filed 12/12/22 Page 12 of 23 Page ID #:214
1 the Court would have specified as such, rather than
2 directing Plaintiff to “allege new facts.” Order 13:4-
3 6. Accordingly, Plaintiff’s amendments exceed the scope 4 of the Court’s August 16, 2022 Order and the Court 5 GRANTS Defendants’ Motion to Strike the added plaintiffs 6 and claims. Plaintiff’s new factual allegations 7 pertaining to his RICO claim are not stricken. 8 2. Motion to Dismiss — RICO Claim 9 The RICO statute makes it unlawful for any person 10 to conduct or participate in an enterprise’s affairs 11 through a pattern of racketeering activity. 18 U.S.C. § 12 1962(c). To state a claim under RICO, Plaintiff must 13 allege facts establishing: “(1) conduct (2) of an 14 enterprise (3) through a pattern (4) of racketeering 15 activity (known as ‘predicate acts’) (5) causing injury 16 to plaintiff’s ‘business or property.’” Living Designs, 17 Inc. v. E.I. Dupont de Nemours & Co., 431 F.3d 353, 361 18 (9th Cir. 2005) (quoting Grimmett v. Brown, 75 F.3d 506, 19 510 (9th Cir. 1996)). 20 Defendants argue that the Court must dismiss 21 Plaintiff’s remaining RICO claim because the SAC fails 22 to allege: (1) the requisite predicate acts; (2) a 23 pattern of racketeering activity; (3) a pattern of 24 racketeering; and (4) an enterprise. See Mem. 6:11- 25 10:27. The Court finds that Plaintiff’s RICO claim 26 fails because the SAC does not allege a cognizable RICO 27 injury that was proximately caused by a pattern of 28 predicate acts. The Court therefore GRANTS Defendant’s 12 Case 2:22-cv-02695-RSWL-JC Document 29 Filed 12/12/22 Page 13 of 23 Page ID #:215
1 Motion as to Plaintiff’s RICO cause of action.
2 a. Enterprise
3 An “enterprise” includes “any individual, 4 partnership, corporation, association, or other legal 5 entity, and any union or group of individuals associated 6 in fact although not a legal entity.” 18 U.S.C. 7 § 1961(4). “Under RICO, two types of associations meet 8 the definition of enterprise: The first encompasses 9 organizations such as corporations and partnerships, and 10 other legal entities. The second covers any union or 11 group of individuals associated in fact although not a 12 legal entity.” Shaw v. Nissan N. Am., Inc., 220 F. 13 Supp. 3d 1046, 1053 (C.D. Cal. 2016) (internal quotation 14 marks omitted) (quoting United States v. Turkette, 452 15 U.S. 576, 581–82 (1981)). 16 Here, Plaintiff argues that the SAC alleges three 17 theories of enterprises. See Opp’n 13:22-14:18, ECF 18 No. 26. First, it alleges that Daroya-Lushina and Ramos 19 acted through CKE, which the Court previously found to 20 be a sufficiently alleged enterprise. Id. at 14:10-12; 21 Order 7:22-8:7. Second, it alleges the existence of an 22 enterprise consisting of Defendant Daroya-Lushina, 23 Defendant Ramos, CKE, and JLA. Id. at 14:13-16. Third, 24 Plaintiff argues that in the alternative, two separate 25 enterprises existed consisting of Defendants and CKE, 26 and Defendants and JLA. Id. at 14:15-18. The Court 27 analyzes the allegations pertaining to each potential 28 enterprise in turn. 13 Case 2:22-cv-02695-RSWL-JC Document 29 Filed 12/12/22 Page 14 of 23 Page ID #:216
1 As before, with regard to Defendants’ alleged
2 infiltration of CKE, the Court finds that Plaintiff has
3 adequately alleged the existence of an enterprise. A 4 RICO enterprise must be “an entity separate and apart 5 from the pattern of [racketeering] activity in which it 6 engages.” Turkette, 452 U.S. at 583. The SAC describes 7 CKE as a legitimate LLC, which Defendants infiltrated 8 and conducted through a pattern of racketeering 9 activity. See SAC ¶ 17. CKE therefore existed 10 separately from the alleged racketeering activity for 11 which it was used, and thus constitutes a RICO 12 enterprise. See United Energy Owners Comm., Inc. v. 13 U.S. Energy Mgmt. Sys., Inc., 837 F.2d 356, 362-64 (9th 14 Cir. 1988). 15 Plaintiff’s second argument that Defendant Daroya- 16 Lushina, Defendant Ramos, CKE, and JLA constitute an 17 enterprise is equivalent to alleging an association-in- 18 fact enterprise since Plaintiff does not contend that 19 these entities and individuals are a legal entity. And 20 Plaintiff’s allegations of this association-in-fact 21 enterprise are insufficient. 22 An association-in-fact enterprise is “a group of 23 persons associated together for a common purpose of 24 engaging in a course of conduct.” Turkette, 452 U.S. 25 at 583. The enterprise must have some sort of structure 26 or framework, meaning there must be “relationships among 27 those associated with the enterprise.” Boyle v. United 28 States, 556 U.S. 938, 946 (2009). Here, the SAC does 14 Case 2:22-cv-02695-RSWL-JC Document 29 Filed 12/12/22 Page 15 of 23 Page ID #:217
1 not allege any relationship between CKE and JLA. While
2 Plaintiff alleges that Defendant Daroya-Lushina and
3 Defendant Ramos used both entities to commit 4 racketeering activity, the acts involving each entity 5 were completely unrelated to one another. The two 6 companies therefore had no common purpose, and they were 7 not associated together to form “a vehicle for the 8 commission of two or more predicate acts.” See Odom v. 9 Microsoft Corp., 486 F.3d 541, 552 (9th Cir. 2007). 10 Plaintiff therefore fails to allege the existence of an 11 association-in-fact enterprise. 12 Finally, with regard to Defendants’ alleged 13 infiltration of JLA, Plaintiff has adequately alleged 14 the existence of an enterprise. Just as with CKE, the 15 SAC described JLA as a legitimate corporation, which 16 Defendants infiltrated and conducted a pattern of 17 racketeering activity through. See SAC 14, 36-39. JLA 18 therefore existed separately from the alleged 19 racketeering activity for which it was used, and thus 20 constitutes a RICO enterprise. See United Energy Owners 21 Comm., Inc., 837 F.2d at 362-64. 22 Since Plaintiff has sufficiently alleged the 23 existence of enterprises through CKE and JLA only, the 24 Court analyzes the predicate acts discussed in the SAC 25 pertaining solely to CKE and JLA. 26 b. Injury Caused by Predicate Acts 27 A RICO claim requires a pattern of two or more 28 predicate acts that cause injury to the plaintiff’s 15 Case 2:22-cv-02695-RSWL-JC Document 29 Filed 12/12/22 Page 16 of 23 Page ID #:218
1 business or property. Living Designs, 431 F.3d at 361.
2 A predicate act is “any act indictable under any of the
3 statutory provisions listed in 18 U.S.C. § 1961(1).” In 4 re Toyota Motor Corp., 785 F. Supp. 2d 883, 918 5 (C.D. Cal. 2011). Here, the predicate acts Plaintiff 6 alleges are mail fraud in violation of 18 U.S.C. § 1341 7 and wire fraud in violation of 18 U.S.C. § 1343. See 8 SAC ¶ 46. 9 i. CKE Enterprise 10 Plaintiff alleges that Defendants committed mail 11 and wire fraud through the CKE enterprise for 12 essentially two purposes. First, Ramos engaged in a 13 wire fraud to falsely identify Daroya-Lushina as the 14 sole manager of CKE. SAC ¶ 23. Second, Defendants 15 jointly engaged in mail or wire fraud to sell the 16 Property, which was CKE’s main asset, and to collect the 17 proceeds of the sale for themselves. Id. ¶¶ 28, 30. In 18 turn, Plaintiff suffered two distinct injuries. The 19 first act of wire fraud deprived Plaintiff of his 20 rightful interest in CKE. Id. ¶ 21. The sale of the 21 Property deprived Plaintiff of his rightful share in the 22 proceeds of the sale. Id. 23 The Court previously noted that “[w]hile 24 Plaintiff’s first injury — loss of membership interest 25 in CKE — may be a cognizable RICO injury, this harm 26 arose from a single act of wire fraud.” Order 9:26-28. 27 Indeed, the single predicate act that Plaintiff alleged 28 in his First Amended Complaint was insufficient to 16 Case 2:22-cv-02695-RSWL-JC Document 29 Filed 12/12/22 Page 17 of 23 Page ID #:219
1 establish a pattern of racketeering activity. 18 U.S.C. 2 § 1961(5) (“[A] ‘pattern of racketeering activity’
3 requires at least two acts of racketeering activity.”). 4 Now, in his Second Amended Complaint, Plaintiff 5 states that while he “specifically identif[ies] 6 falsified documents and communications in a good faith 7 effort to comply with Rule 9(b),” Plaintiff currently 8 does not have in his “possession, custody and/or control 9 all of the relevant [e-mails], communications, and/or 10 false documents that [he] believe[s] were 11 circulated/transmitted by and between Defendants and 12 various third parties in furtherance of their fraudulent 13 scheme.” SAC ¶ 22. Plaintiff remarks that, regardless, 14 he is informed and believes that Defendants were each 15 “responsible for sending multiple communications and 16 submitting multiple documents” to perpetuate their 17 fraudulent scheme, “but cannot identify with certainty 18 which was personally responsible for sending each such 19 communication or document until certain discovery is 20 permitted.” Id. 21 Nonetheless, Plaintiff proceeds to plead that on or 22 about April 20, 2022, “Defendants filed an additional 23 false Statement of Information with the California 24 Secretary of State,” which Plaintiff believes Defendants 25 submitted “electronically through the internet.” Id. at 26 24. But it is unclear how this act causes Plaintiff 27 harm. By April 20, 2022, Defendants had already filed 28 an allegedly false Statement of Information with the 17 Case 2:22-cv-02695-RSWL-JC Document 29 Filed 12/12/22 Page 18 of 23 Page ID #:220
1 California Secretary of State that deprived Plaintiff of
2 his interest in CKE. See SAC ¶ 21, 23 (Explaining that
3 on September 23, 2021, Defendants caused a false 4 Statement of Interest to be filed, effectively depriving 5 Plaintiff of his interest in CKE). Thus, once again, 6 the merit of Plaintiff’s RICO claim turns on whether 7 Plaintiff has alleged that Defendants’ other predicate 8 acts — related to the sale of the Property — caused a 9 cognizable RICO injury. 10 The Court concludes that Plaintiff has not, and 11 Plaintiff’s RICO claim therefore fails. Because this 12 conclusion is dispositive, the Court does not reach 13 Defendants’ other arguments as to the merits of the RICO 14 claim. 15 To allege a cognizable RICO injury, Plaintiff must 16 show “a harm to a specific business or property 17 interest” that was caused directly by Defendants’ RICO 18 violation. In re ZF-TRW Airbag Control Units Prods. 19 Liab. Litig., No. LA ML19-02905 JAK (FFMx), 2022 WL 20 522484, at *59-60 (C.D. Cal. Feb. 9, 2022) (citations 21 omitted). Here, Plaintiff alleges that Defendants’ sale 22 of the Property deprived Plaintiff of his rightful share 23 in the sale’s proceeds. SAC ¶ 21. Plaintiff argues 24 that because he has a 50% ownership interest in CKE, he 25 is entitled to at least 50% of the proceeds from the 26 sale of CKE’s main asset. Opp’n 15:10-12. 27 As discussed in the August 16, 2022 Order, under 28 California law, “members of [an] LLC hold no direct 18 Case 2:22-cv-02695-RSWL-JC Document 29 Filed 12/12/22 Page 19 of 23 Page ID #:221
1 ownership interest in the company’s assets.” PacLink
2 Commc’ns Int’l, Inc. v. Superior Ct., 109 Cal. Rptr. 2d
3 436, 440 (Cal. Ct. App. 2001). Thus, “the members 4 cannot be directly injured when the company is 5 improperly deprived of those assets.” Id. That 6 deprivation “constitutes an injury to the company 7 itself,” and any action brought by an individual member 8 must be derivative in nature on the company’s behalf. 9 Id. Here, Plaintiff’s alleged deprivation of his fair 10 share of the proceeds is only incidental to the injury 11 caused to CKE itself. See PacLink, 109 Cal. Rptr. 2d at 12 441. Because the injury alleged in the SAC was one to 13 the LLC and not to Plaintiff directly, Plaintiff lacks 14 standing to assert it. See Sparling v. Hoffman Const. 15 Co., Inc., 864 F.2d 635, 640-41 (9th Cir. 1988) 16 (concluding that shareholder plaintiff lacked RICO 17 standing where RICO claims were based on injury to 18 corporation). While Plaintiff amended his Complaint to 19 include CKE and two other entities as plaintiffs, 20 perhaps in an attempt to establish standing, this Court 21 did not grant leave to add parties and has stricken the 22 added parties. Accordingly, Plaintiff still bears the 23 burden of pleading he has standing. Plaintiff has 24 therefore failed to assert a cognizable RICO injury 25 caused by the predicate acts committed by Defendants in 26 selling the Property. 27 /// 28 /// 19 Case 2:22-cv-02695-RSWL-JC Document 29 Filed 12/12/22 Page 20 of 23 Page ID #:222
1 ii. JLA Enterprise
2 Plaintiff fails to allege that Defendants used JLA
3 to commit predicate acts causing him injury. Plaintiff 4 contends that Defendants committed theft, fraud, wire 5 and/or mail fraud through JLA. SAC ¶ 46. To support 6 these claims, Plaintiff alleges that Defendants 7 electronically filed a false Statement of Information 8 with the California Secretary of State identifying 9 Daroya-Lushina as the sole director and officer of JLA 10 and altering JLA’s mailing address. Id. ¶ 36. 11 Plaintiff contends that as a result, “at least several 12 checks made payable to JLA from JLA’s clients” were 13 improperly forwarded to Defendants, at which time 14 Defendants forged endorsements on those checks and 15 deposited the funds into their own accounts. Id. ¶ 38. 16 Finally, Defendants allegedly changed the passwords to 17 JLA’s websites and altered the sites through “the 18 electronic submission of false information.” Id. ¶ 39. 19 Just as with CKE, any injury caused by these 20 activities was sustained by JLA, not by Plaintiff in his 21 personal capacity. See Sparling, 864 F.2d at 640-41. 22 Therefore, Plaintiff has failed to allege a pattern of 23 predicate acts causing him injury. 24 In sum, while Plaintiff may have properly alleged 25 the existence of enterprises and the requisite number of 26 predicate acts, Plaintiff has failed to allege that 27 those acts caused harm to Plaintiff’s business or 28 property. Plaintiff therefore fails to state a civil 20 Case 2:22-cv-02695-RSWL-JC Document 29 Filed 12/12/22 Page 21 of 23 Page ID #:223
1 RICO claim. 2 3. Supplemental Jurisdiction
3 Defendants further request that the Court decline 4 to exercise supplemental jurisdiction over Plaintiff’s 5 state law claims. Mot. 13:14-14:14. A district court 6 may decline to exercise supplemental jurisdiction over 7 state law claims where the court has dismissed all 8 claims over which it has original jurisdiction. 9 28 U.S.C. § 1367(c)(3). “[I]f the federal claims are 10 dismissed before trial . . . the state claims should be 11 dismissed as well.” United Mine Workers of Am. v. 12 Gibbs, 383 U.S. 715, 726 (1966). 13 Here, Plaintiff’s remaining causes of action are 14 state law claims within the Court’s discretionary 15 supplemental jurisdiction. Because Plaintiff’s federal 16 RICO conspiracy claim is stricken, and his federal RICO 17 claim is subject to dismissal, the Court declines to 18 address the Motion’s arguments as to Plaintiff’s state 19 law claims. Plaintiff failed to amend the FAC to 20 properly state a federal claim for relief, so the Court 21 dismisses the remaining state law claims. See Nguyen v. 22 Global Equip. Servs. & Mfg., Inc., No. 18-cv-01824-NC, 23 2018 WL 10758158, at *6 (N.D. Cal. Oct. 2, 2018). 24 4. Leave to Amend 25 “The court should give leave [to amend] freely when 26 justice so requires.” Fed. R. Civ. P. 15(a)(2). “Rule 27 15’s policy of favoring amendments to pleadings should 28 be applied with ‘extreme liberality.’” United States v. 21 Case 2:22-cv-02695-RSWL-JC Document 29 Filed 12/12/22 Page 22 of 23 Page ID #:224
1 Webb, 655 F.2d 977, 979 (9th Cir. 1981). Against this
2 extremely liberal standard, the Court may consider “the
3 presence of any of four factors: bad faith, undue delay, 4 prejudice to the opposing party, and/or futility.” 5 Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 6 712 (9th Cir. 2001). 7 Here, Plaintiff requests leave to amend to include 8 new claims or parties, or to cure the SAC’s 9 deficiencies. See Opp’n 16:11-19. Plaintiff amended 10 his Complaint as a matter of course and the Court 11 already granted Plaintiff leave to amend his FAC to 12 state a cognizable RICO claim. Plaintiff has had 13 multiple opportunities to refine his claim, yet still 14 has not stated a plausible claim for relief. See Allen 15 v. City of Beverly Hills, 911 F.2d 367, 373 (9th Cir. 16 1990) (“The district court’s discretion to deny leave to 17 amend is particularly broad where plaintiff has 18 previously amended the complaint.”). The Court 19 therefore dismisses Plaintiff’s RICO claim without leave 20 to amend. 22 Based on the foregoing, the Court GRANTS 23 Defendants’ Motion to Strike the new plaintiffs and 24 claims added in the SAC and GRANTS Defendant’s Motion to 25 Dismiss as to Plaintiff’s RICO claim without leave to 26 amend. 27 Because the only federal claim is dismissed, the 28 Court declines to exercise supplemental jurisdiction 22 Case 2:22-cv-02695-RSWL-JC Document 29 Filed 12/12/22 Page 23 of 23 Page ID #:225
1 over Plaintiff’s state law causes of action.
2 Accordingly, the Court does not address the merits of
3 Plaintiff’s state law causes of action. Therefore, 4 there are no claims remaining and the Court closes this 5 case. 6 8 9 DATED: December 12, 2022 _ _ _ _ _ _ _ /S_/_ R_O_N_A_LD_ _S_.W_._ L_E_W_ ________ HONORABLE RONALD S.W. LEW 10 Senior U.S. District Judge 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 23