Relevant Group, LLC v. Nourmand

• Court: District Court, C.D. California
• Decided: May 18, 2020
• Docket: 2:19-cv-05019
• Status: Unknown

Opinion

O 1

2 3 4 5 6 7 United States District Court 8 Central District of California 9 10 11 RELEVANT GROUP, LLC, et al., Case № 2:19-cv-05019-ODW (KSx) 12 Plaintiffs, ORDER GRANTING IN PART 13 v. DEFENDANTS’ MOTIONS TO 14 NOURMAND, et al., DISMISS AND DENYING MOTION 15 Defendants. FOR SANCTIONS [22, 23, 24, 34] 16 I. INTRODUCTION 17 18 Before the Court are three concurrently filed motions: (1) Defendants 19 Nourmand & Associates (“N&A”) Motion to Dismiss Plaintiffs’ First Amended 20 Complaint (“FAC”) (“Motion I”) (Mot. to Dismiss (“Mot. I”), ECF No. 22); (2) 21 Stephan “Saeed” Nourmand (“Saeed”) and The Sunset Landmark Investment LLC 22 (“Sunset”) (collectively “Defendants S”) Motion to Dismiss Plaintiffs’ FAC (“Motion 23 II”) (Mot. to Dismiss (“Mot. II”), ECF No. 23); (3) Defendants S Motion to Sanction 24 Plaintiffs (“Motion III”). (Mot. for Sanction (“Mot. III”), ECF No. 34.) For the 25 reasons discussed below, the Motions to Dismiss are GRANTED in part, and 26 DENIED in part, and the Motion for Sanctions is DENIED.1 27

28 1 After carefully considering the papers filed in connection with the Motion, the Court deemed the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; C.D. Cal. L.R. 7-15. 1 II. FACTUAL BACKGROUND 2 Plaintiffs allege the following facts. Plaintiffs Relevant Group, LLC 3 (“Relevant”), 1541 Wilcox Hotel LLC (“Wilcox”), and 6516 Tommie Hotel LLC 4 (“Tommie”) 5421 Selma Wilcox Hotel LLC (“Selma”) (collectively “Plaintiffs”) are 5 limited liability companies operating in Los Angeles. (First Am. Compl. (“FAC”) ¶¶ 6 10–13, ECF No. 21.) Wilcox, Tommie, and Selma are special purpose entities created 7 to develop properties in Hollywood and are managed by Relevant. (FAC ¶ 14.) 8 Sunset is a California limited liability company, whereas N&A is a California 9 corporation that functions as a real estate broker. Both Defendants share employees 10 and officers and operate in Los Angeles. (FAC ¶¶ 15, 17.) Saeed is an individual who 11 does business and lives in Los Angeles. (FAC ¶ 16.) According to Plaintiffs, Saeed 12 operates with Sunset and N&A as a unified enterprise (“Nourmand Enterprise”) that 13 develop and sell real estate in the Los Angeles area. (FAC ¶ 18.) Plaintiffs allege that 14 Defendants conspired against and extorted millions of dollars from competing 15 developers by reflexively initiating frivolous litigation under the California 16 Environmental Quality Act (“CEQA”) without intention of reducing adverse 17 environmental impact. (FAC ¶¶ 2, 23–24.) 18 As a pattern of conduct, Plaintiffs allege that Defendants targeted developers 19 which they knew were economically vulnerable and dependent upon the development 20 of their property, and thus, susceptible to extortion. (FAC ¶¶ 8, 24, 42, 61, 74.) 21 Defendants would then reflexively initiate and pursue sham CEQA litigation against 22 vulnerable developers with the simple goal of padding their own wallets and securing 23 personal concessions, rather than reducing adverse environmental impact. (FAC ¶ 24 24.) 25 Plaintiffs specifically allege four instances where Defendants conspired and 26 extorted from competing developers, aware that Relevant managed three of the four 27 developers. (FAC ¶¶ 39–79.) The first instance occurred on March 3, 2016, when 28 Sunset initiated a lawsuit against the City of Los Angeles naming Wilcox as a real 1 party in interest. (FAC ¶ 39.) Plaintiffs allege that Sunset advanced meritless 2 arguments to delay the competing development and unlawfully extort millions of 3 dollars. (FAC ¶ 42.) On June 9, 2017, Sunset again initiated a lawsuit against the 4 City of Los Angeles and named Tommie as a real party in interest. (FAC ¶ 60.) 5 Again, Sunset made more of the same meritless arguments. (FAC ¶ 61.) Even though 6 Plaintiffs believed that the CEQA litigation was frivolous and a sham, nevertheless, 7 Plaintiffs decided to negotiate with Defendants. (FAC ¶ 50.) On January 8, 2018, 8 after lengthy negotiations, Sunset, Wilcox and Tommie settled both CEQA actions for 9 $5.5 million and other unrelated CEQA concessions. (FAC ¶¶ 52–55.) 10 The third incident involved Owners of the Schrader Hotel (“Schrader”). Sunset 11 initiated another frivolous and sham administrative CEQA appeal in attempt to extort 12 monies and unrelated CEQA concessions from Schrader. (FAC ¶¶ 65–66.) Schrader 13 agreed to negotiate only legitimate environmental concerns and “would not negotiate 14 any request . . . unrelated to CEQA.” (FAC ¶ 67.) Consequently, Defendants 15 dismissed its administrative CEQA appeal. (FAC ¶ 68.) 16 The final incident involved, yet again, Sunset filing a lawsuit against the City of 17 Los Angeles naming Selma as a real party in interest. (FAC ¶ 73.) But before Sunset 18 initiated the lawsuit against Selma, Selma met with Saeed to inquire why Sunset had 19 appealed its proposed development. (FAC ¶ 77.) Saeed told Selma, “[y]ou know the 20 drill. It’s going to take a check to make this go away.” (FAC ¶ 78.) Plaintiffs assert 21 that Saeed’s statement establishes that he used the threat of litigation for the sole 22 purpose of extorting money from Selma and not based on any purported concern 23 regarding environmental impacts. (FAC ¶ 78.) Defendants filed suit against Selma on 24 April 2, 2019. Selma refused to settle the lawsuit because it allegedly contained sham 25 environmental concerns. (FAC ¶ 79.) 26 Ultimately on June 10, 2019, Plaintiffs filed suit against Defendants and filed a 27 first amended complaint (“FAC”) alleging three counts of conspiracy to violate the 28 federal Racketeer Influenced and Corrupt Organizations Act (“RICO”), and extortion 1 in violation of California Penal Code sections 518, 522–24. (FAC ¶¶ 80–131.) 2 Defendants now move to dismiss Plaintiffs’ claims and seek sanctions for violation of 3 Federal Rules Civil Procedure (“Rule”) 11. (Mot. I; Mot. II; Mot. III.) The Court 4 now turns to the Parties’ arguments. 5 III. LEGAL STANDARD 6 A court may dismiss a complaint under Rule 12(b)(6) for lack of a cognizable 7 legal theory or insufficient facts pleaded to support an otherwise cognizable legal 8 theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988). A 9 court may also dismiss a complaint for lack of subject matter jurisdiction, pursuant to 10 Rule 12(b)(1). 11 To survive a motion to dismiss, a complaint need only satisfy the minimal 12 notice pleading requirements of Rule 8(a)(2)—a short and plain statement of the 13 claim. Porter v. Jones, 319 F.3d 483, 494 (9th Cir. 2003). The factual “allegations 14 must be enough to raise a right to relief above the speculative level.” Bell Atl. Corp. 15 v. Twombly, 550 U.S. 544, 555 (2007). That is, the complaint must “contain sufficient 16 factual matter, accepted as true, to state a claim to relief that is plausible on its face.” 17 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). These factual allegations must provide 18 fair notice and enable the opposing party to defend itself effectively. Starr v. Baca, 19 652 F.3d 1202, 1216 (9th Cir. 2011). 20 The determination whether a complaint satisfies the plausibility standard is a 21 “context-specific task that requires the reviewing court to draw on its judicial 22 experience and common sense.” Iqbal, 556 U.S. at 679. A court is generally limited 23 to the pleadings and must construe all “factual allegations set forth in the complaint . . 24 . as true and . . . in the light most favorable” to the plaintiff. Lee, 250 F.3d at 688. 25 But a court need not blindly accept conclusory allegations, unwarranted deductions of 26 fact, and unreasonable inferences. Sprewell v. Golden State Warriors, 266 F.3d 979, 27 988 (9th Cir. 2001). 28 As a general rule, leave to amend a complaint that has been dismissed should be 1 freely granted. Fed. R. Civ. P. 15(a). However, leave to amend may be denied when 2 “the court determines that the allegation of other facts consistent with the challenged 3 pleading could not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well 4 Furniture Co., 806 F.2d 1393, 1401 (9th Cir.1986); see Lopez v. Smith, 203 F.3d 5 1122, 1127 (9th Cir. 2000). 6 IV. REQUESTS FOR JUDICIAL NOTICE 7 The Court may take judicial notice of any fact that is “not subject to reasonable 8 dispute in that it is either (1) generally known within the territorial jurisdiction of the 9 trial court or (2) capable of accurate and ready determination by resort to sources 10 whose accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b). A court 11 shall take judicial notice of such a fact if requested by a party and supplied with the 12 necessary information. Fed. R. Evid. 201(d). “A trial court may presume that public 13 records are authentic and trustworthy.” Gilbrook v. City of Westminster, 177 F.3d 14 839, 858 (9th Cir. 1999). 15 Here, the parties submitted dozens of documents that they claim are relevant to 16 the underlying evidence regarding the facts in dispute. (Req. for Jud. Not., ECF Nos. 17 22-3, 23-3, 23-4, 24.) The Court DENIES the requests, as the documents are hotly 18 disputed, and the full record of events has yet to be established in this case. See In re 19 Am. Cont’l Corp./Lincoln Sav. & Loan Sec. Litig., 102 F.3d 1524, 1537 (9th Cir. 20 1996), rev’d on other grounds sub nom. Lexecon, Inc. v. Milberg Weiss Bershad 21 Hynes & Lerach, 523 U.S. 26 (1998) (courts generally cannot consider materials 22 outside of the complaint in ruling on a Rule 12(b)(6) motion to dismiss). 23 V. DISCUSSION 24 Defendants assert five arguments as to why this Court should dismiss Plaintiffs’ 25 FAC, they include (1) the Noerr-Pennington doctrine; (2) Plaintiffs released their 26 RICO claims; (3) Prudential and Abstention doctrines; (4) Plaintiffs lack standing; and 27 (5) Plaintiffs fail to adequately plead RICO claims. (Mot. I 2; Mot. II 2–3.) The 28 Court shall address each argument in turn. 1 A. Doctrine 2 The Court begins by considering the threshold issue whether the Noerr- 3 Pennington doctrine immunizes Defendants from RICO liability. 4 “Under the Noerr-Pennington doctrine, those who petition any department of 5 the government for redress are generally immune from statutory liability for their 6 petitioning conduct.” Sosa v. DIRECTV, Inc., 437 F.3d 923, 929 (9th Cir. 2006). The 7 Supreme Court has since applied Noerr-Pennington principles outside the antitrust 8 field based on the First Amendment Petition Clause. Id. at 929–30; see also Kearney 9 v. Foley & Lardner, LLP, 590 F.3d 638, 648 (9th Cir. 2009) (the doctrine was 10 subsequently extended to bar other causes of action brought against a protected 11 petitioner, including RICO actions). However, “courts rarely award Noerr- 12 Pennington immunity at the motion to dismiss stage, where the Court must accept as 13 true the non-moving party’s well-pleaded allegations with respect to sham litigation.” 14 In re Outlaw Lab., LP Litig., No. 3:18-CV-1820-GPC-BGS, 2019 WL 1205004, at *5 15 (S.D. Cal. Mar. 14, 2019) 16 Defendants argue that Noerr-Pennington doctrine immunizes their act of 17 petitioning CEQA lawsuits, and thus, Plaintiffs’ RICO claims are barred. (Mot. I 7–9; 18 Mot. II 8–10.) Plaintiffs argue not so because Defendants CEQA petitions are 19 “reflexive sham environmental lawsuits for the sole purpose of delaying the 20 development of competing properties,” thus the doctrine is inapplicable. (FAC ¶ 2.) 21 In the context of litigation, the Ninth Circuit has identified three types of 22 situations in which the sham exception to Noerr-Pennington immunity may apply: (1) 23 “where the lawsuit is objectively baseless and the defendant’s motive in bringing it 24 was unlawful”; (2) “where the conduct involves a series of lawsuits brought pursuant 25 to a policy of starting legal proceedings without regard to the merits and for an 26 unlawful purpose”; and (3) “if the allegedly unlawful conduct consists of making 27 intentional misrepresentations to the court, litigation can be deemed a sham if a 28 party’s knowing fraud upon, or its intentional misrepresentations to, the court deprive 1 the litigation of its legitimacy.” Sosa, 437 F.3d at 938 (internal quotation marks and 2 citations omitted). Here, only the first two exceptions are relevant. 3 Under the first exception, there is a two-part test for whether something 4 meets the definition of “sham” litigation: (1) “the lawsuit must be objectively 5 baseless in the sense that no reasonable litigant could realistically expect success 6 on the merits[;]” and (2) “whether the baseless lawsuit conceals an attempt to 7 interfere directly with the business relationships of a competitor.” 8 , 508 U.S. 49, 60–61 (1993). 9 However, the strict two-part analysis from does not 10 apply under the second exception, known as the exception. 11 , 12 31 F.3d 800, 810–11 (9th Cir. 1994). Instead, “the question is not whether any 13 one [suit] has merit . . . but whether they are brought pursuant to a policy of 14 starting legal proceedings without regard to the merits and for the purpose of 15 injuring a market rival.” 16 , 863 F.3d 1178, 1187 (9th Cir. 2017) (internal citations omitted). In such a 17 context, the legal success of an occasional sham suit is irrelevant. . 18 Regardless of which exception may apply, Defendants assert that Plaintiffs have 19 not met their burden to satisfy either exception. (Mot. I 7–9; Mot. II 8–10.) Plaintiffs 20 argue that they need only satisfy the exception, as they allege a 21 series of improper lawsuits. (Opp’n to Mot. I (“Opp’n I”) 6, ECF No. 27; Opp’n 22 to Mot. II (“Opp’n II”) 4, ECF No. 26.) As an initial matter the Court shall 23 determine whether the exception or 24 exception applies. 25 The Ninth Circuit has not established how many lawsuits are required to 26 meet the pleading requirements of a “pattern” such that 27 ’s strict two-part analysis is not applied. , 31 28 F.3d at 811 (finding twenty-nine lawsuits potentially a “pattern”), 1 , 102 F.3d 1494, 1519 (9th Cir. 1996) (“Although we do not attempt to 2 define here the number of legal proceedings needed to allege a ‘series’ or 3 ‘pattern’ of litigation” two lawsuits do not constitute a “pattern”). Rather, the 4 Ninth Circuit and district courts make such determinations on a case by case 5 basis. 6 , No. 119CV00416LJOSKO, 2020 WL 91998, at *9–10 (E.D. 7 Cal. Jan. 8, 2020) (collecting cases). To determine whether the 8 exception applies, the Court finds the Third Circuit’s decision in 9 ., persuasive. 806 F.3d 162, 181 (3d Cir. 10 2015). In , the Third Circuit held that four sham petitions were 11 sufficient to amount to a “series of lawsuits” as required by the 12 exception. . The Third Circuit made such a determination because plaintiff 13 had sufficiently alleged that defendants filed four sham petitions for the purpose 14 of obstructing plaintiff in obtaining necessary government approvals for a real 15 estate project. . 16 Defendants proffer a strawman argument, narrowly focused on the 17 quantity of lawsuits, which is not dispositive to the Court’s analysis. (Mot. 9–10.) 18 Again, the question is whether Plaintiff has appropriately alleged that the CEQA 19 suits “are brought pursuant to a policy of starting legal proceedings without 20 regard to the merits and for the purpose of injuring a market rival.” 21 , 31 F.3d at 811. According to Plaintiffs, Defendants target 22 competing developers, and initiate or threaten to initiate reflexive sham 23 environmental lawsuits for the sole purpose of delaying the development of 24 competing properties. (FAC ¶¶ 2, 23–33.) Plaintiffs also allege four instances 25 where Defendants initiated such environmental lawsuits for the sole purpose of 26 delaying competing real estate projects and extorting money from competitors. 27 (FAC ¶¶ 1–2, 34–79.) The Court finds that Plaintiffs’ allegations are adequate 28 1 for the purposes of alleging the sham exception. , 806 at 2 181. 3 At the pleading stage, Plaintiffs have sufficiently alleged that Defendants’ 4 environmental lawsuits constitute “sham” litigation as an exception to the 5 doctrine. In re Outlaw Lab., 2019 WL 1205004, at *5 (courts rarely 6 award Noerr-Pennington immunity at the motion to dismiss stage). For instance, 7 Plaintiffs allege that Defendants demanded “aesthetic changes” unrelated to 8 environmental concerns to settle lawsuits and told Plaintiffs “[y]ou know the 9 drill. It’s going to take a check to make this go away.” (FAC ¶¶ 45, 77.) 10 Accordingly, the Noerr-Pennington doctrine does not immunize Defendants from 11 RICO liability, therefore, Defendants’ motion to dismiss premised upon the Noerr- 12 Pennington doctrine is DENIED. 13 B. Release of RICO Claims 14 Defendants further argue that Wilcox and Tommie released their RICO claims 15 upon execution of the settlement agreements with Sunset, and thus Plaintiffs’ RICO 16 claims fail. (Mot. II 10–11.) Plaintiffs oppose by arguing that the releases contained 17 in the Wilcox and Tommie settlement agreements were expressly limited, and 18 Defendants had not yet attempted to extort Selma. (Opp’n II 11.) 19 In a motion to dismiss, a court may consider only the content of the pleadings. 20 See Fed. R. Civ. P. 12(d) (noting that if the court considers evidence beyond the 21 pleadings, the motion is one for summary judgment). However, the scope of the 22 pleadings includes documents that are incorporated by reference into the pleadings. 23 Fed. R. Civ. Pro. 10(c). Here, the parties have incorporated the Wilcox and Tommie 24 agreements executed with Sunset, accordingly, the Court takes notice of their 25 existence. However, the Court finds that the agreements are susceptible to 26 interpretations other than the one set forth by Defendants, and thus, declines to make 27 such a determination at the pleading stage where the court must construe the 28 complaint in the light most favorable to Plaintiff. See Prime Healthcare Serv., Inc. v. 1 Illinois Union Ins. Co., No. 2:19-CV-2242-RGK-PJW, 2019 WL 6729700, at *2–3 2 (C.D. Cal. Oct. 3, 2019) (declining to make a contractual interpretation where the 3 writing was susceptible to two or more reasonable interpretations.). Therefore, 4 Defendants motion to dismiss premised upon the release of RICO claims is DENIED 5 at this stage of litigation. 6 C. Choice of Law, Res Judicata, Abstention 7 1. Choice of Law 8 Defendants absurdly argue Plaintiffs’ claims are barred from federal court 9 because the Wilcox and Tommie agreements contain choice of law clauses. (Mot. 10 II 21.) Plaintiffs correctly point out that Defendants have conflated a choice-of-law 11 clause with a forum selection clause. (Opp’n II 23.) To educate, “a forum selection 12 clause designates the state or court where litigation may be brought, while a choice-of- 13 law clause identifies the substantive law that will be applied.” Khokhar v. Yousuf, No. 14 C 15-06043-SBA, 2017 WL 3535055, at *3 (N.D. Cal. Aug. 16, 2017). Bordering the 15 line of frivolous, Defendants argument is rejected and their request to dismiss 16 Plaintiffs’ complaint premised on a choice of law clause is DENIED. 17 2. Res Judicata 18 Defendants next argue that res judicata bars Plaintiffs’ RICO claims because 19 they should have brought their RICO claims in the earlier state court action. (Mot. 20 II 22.) Plaintiffs argue that neither identity of claims nor privity exist between Parties, 21 and thus, res judicata is inapplicable. (Opp’n II 23.) “Res judicata is applicable 22 whenever there is (1) an identity of claims, (2) a final judgment on the merits, and (3) 23 privity between parties.” Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg’l Planning 24 Agency, 322 F.3d 1064, 1077 (9th Cir. 2003). “Identity of claims exists when two 25 suits arise from the same transactional nucleus of facts. Newly articulated claims 26 based on the same nucleus of facts may still be subject to a res judicata finding if the 27 claims could have been brought in the earlier action.” Id. 28 1 Here, Plaintiffs RICO claims are not based on the same nucleus of facts as 2 Sunset’s CEQA lawsuits. For instance, Plaintiffs allege: (1) new Defendants in 3 addition to Sunset, (2) Defendants functioned as an enterprise, (3) Defendants 4 engaged in repeated acts of racketeering, (4) Saeed stated “[y]ou know the drill. It’s 5 going to take a check to make this go away.” (See generally FAC.) These facts are 6 not of the same nucleus of facts as Sunset’s CEQA lawsuits filed against the City of 7 Los Angeles. Tahoe-Sierra Pres. Council, Inc., 322 F.3d at 1077 (stating “[i]dentity 8 of claims exists when two suits arise from the same transactional nucleus of facts.”) 9 Furthermore, only after settling the state court actions did Saeed make the alleged 10 statement, consequently, Plaintiffs could not have brought their claims in the prior 11 actions. Id. (finding that res judicata applies if claims could have been brought in the 12 earlier action.) As Plaintiffs’ RICO claims are not barred by res judicata, therefore, 13 Defendants motion to dismiss premised upon that doctrine is DENIED. 14 3. Younger Abstention 15 The Younger abstention is narrow and limited to “three exceptional categories” 16 of proceedings: (1) “parallel, pending state criminal proceeding[s],” (2) “state civil 17 proceedings that are akin to criminal prosecutions,” and (3) state civil proceedings that 18 “implicate a State’s interest in enforcing the orders and judgments of its courts.” 19 Sprint Commc’ns, Inc. v. Jacobs, 571 U.S. 69, 72–73 (2013). 20 Defendants assert that the third category applies because the underlying CEQA 21 cases involves California’s interest in enforcing its environmental laws, thus the 22 Younger abstention bars Plaintiffs’ RICO claims. (Mot. II 23.) The Plaintiffs argue 23 that Younger does not bar their RICO claims because the underlying CEQA litigation 24 is neither a quasi-criminal action nor involves California’s interest in enforcing the 25 orders and judgments of its Courts. (Opp’n II 23–24.) 26 The Ninth Circuit has held that it is not the bare subject matter of the underlying 27 state law that is tested to determine whether the state proceeding implicates an 28 important state interest for Younger purposes. Potrero Hills Landfill, Inc. v. Cty. of 1 Solano, 657 F.3d 876, 884 (9th Cir. 2011). “Rather, the content of state laws becomes 2 ‘important’ for Younger purposes only when coupled with the state executive’s 3 interest in enforcing such laws.” Id. 4 Here, Defendants have not met its burden to establish that the City of Los 5 Angeles has taken an enforcement posture, rather, Defendants sued the City of Los 6 Angeles for failing to take an enforcement posture. Id. (finding Younger inapplicable 7 because the county had not taken action to enforce the state law against the parties, 8 thus, the county had not taken an enforcement posture); (Mot. II 23.) As the City of 9 Los Angeles has not taken an enforcement posture and Defendants are the ones taking 10 action, the Court finds that Younger is inapplicable. See Potrero Hills Landfill, Inc., 11 657 F.3d at 882 (“a private litigant’s interest in seeing such measures 12 enforced . . . does not implicate the principles of comity and federalism with which 13 Younger and its progeny are concerned.”). Therefore, Defendants’ motion to dismiss 14 premised upon the Younger abstention is DENIED. 15 D. RICO Claims 16 To state a RICO claim Plaintiffs must allege (1) conduct (2) of an enterprise (3) 17 through a pattern (4) of racketeering activity (known as ‘predicate acts’) (5) causing 18 injury to plaintiff’s business or property.” United Bhd. of Carpenters & Joiners of 19 Am. v. Bldg. & Const. Trades Dep’t, AFL-CIO, 770 F.3d 834, 837 (9th Cir. 2014). In 20 addition, a plaintiff only has standing if the RICO predicate offenses were both the 21 “but for” and proximate cause of an injury to plaintiff’s business or property. See § 22 1964(c); Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985) (“[P]laintiff only 23 has standing if . . . he has been injured in his business or property by the conduct 24 constituting the violation.”) 25 Defendants assert that Plaintiffs neither have standing nor have adequately pled 26 the elements of a RICO claim. The Court shall now address each issue in turn. 27 1. Standing to Assert RICO Claims 28 1 To allege civil RICO standing under 18 U.S.C. § 1964(c), a “plaintiff must 2 show: (1) that his alleged harm qualifies as injury to his business or property; and (2) 3 that his harm was [brought about] ‘by reason of’ the RICO violation.’” Canyon Cty v. 4 Syngenta Seeds, Inc., 519 F.3d 969, 972 (9th Cir. 2008). To determine whether a 5 plaintiff has sufficiently alleged injury to his business or property, our circuit requires 6 that a plaintiff asserting injury to property allege concrete financial loss. Id. “[B]y 7 reason of” requires the plaintiff to establish proximate causation. Id. “Proximate 8 causation requires some direct relation between the injury asserted and the injurious 9 conduct alleged.” Id. 10 Defendants assert Plaintiffs lack standing to assert RICO claims because 11 Plaintiffs fail to adequately allege any harm to any specific business or property. 12 (Reply to Opp’n II (Reply II) 10–11, ECF No. 31.) Plaintiffs argue their attorneys’ 13 fees and costs constitute a concrete financial loss because they were incurred 14 responding to Defendants’ sham CEQA lawsuits. (Opp’n II 21.) Courts have 15 previously held that attorneys’ fees incurred in fighting “frivolous lawsuits” initiated 16 by the defendants qualify as an injury to business or property. See In re Outlaw Lab., 17 LP Litig., 2020 WL 1953584, at * 9–10 (holding that attorneys’ fees quality as injury 18 to business and property when a plaintiff alleges that the process of litigating a lawsuit 19 is part and parcel of the scheme) (collecting cases). Moreover, Plaintiffs allege 20 Defendants’ conduct inflicted harm to their business by causing loss of funding and 21 other income associated with the delays to their developments. (FAC ¶¶ 50, 98.) 22 Accordingly, the Court finds that Plaintiffs have adequately alleged harm that 23 qualifies as injury to Plaintiffs’ business or property. 24 Lastly, Defendants assert that Plaintiffs lacks standing because it cannot meet 25 the causation requirement. (Mot. II 18–19.) Again, by reason of Defendants’ scheme 26 of filing sham CEQA lawsuits against Plaintiffs, Plaintiffs have, at a minimum, 27 sustained damages in the form attorneys’ fees. (Opp’n II 21.) Therefore, Plaintiffs 28 have demonstrated a direct relation between the injury they have asserted, and the 1 injurious conduct alleged. Accordingly, Defendants’ motion to dismiss premised 2 upon Plaintiffs’ lack of standing is DENIED. 3 2. Whether Plaintiff Adequately Pled RICO Claims 4 Here, N&A and Defendants S assert that Plaintiffs have failed to adequately 5 allege an enterprise. First, the FAC is silent on any specific factual allegations 6 pertaining to the actions of N&A, other than providing a conference room for 7 Defendants S and Plaintiffs to meet. (Mot. I 6; Mot. II 17.) Second, Plaintiffs have 8 failed to allege sufficient facts establishing Defendants’ participation in the operation 9 or management of the enterprise itself. (Mot. II 17.) Accordingly, Defendants’ argue 10 that Plaintiffs have failed to adequately allege an ongoing organization. 11 A RICO claim requires a plaintiff to plead the existence of an “enterprise” 12 within the meaning of 18 U.S.C. § 1961(4). An enterprise may be a legal entity, or it 13 may be an association-in-fact. 18 U.S.C. § 1961(4). “[A]n associated-in-fact 14 enterprise under RICO does not require any particular organizational structure, 15 separate or otherwise.” Odom v. Microsoft Corp., 486 F.3d 541, 551 (9th Cir. 2007). 16 To allege an association-in-fact, the complaint must (1) describe “a group of persons 17 associated together for a common purpose of engaging in a course of conduct,” (2) 18 provide both evidence of an ongoing organization, formal or informal, and (3) 19 evidence that the various associates function as a continuing unit. Id. at 552 (citing 20 U.S. v. Turkette, 452 U.S. 576, 583 (1981)). 21 Plaintiffs assert that it has adequately satisfied the ongoing organization prong 22 by alleging that N&A held a meeting in its offices between Defendants S and 23 Plaintiffs, where N&A holds out Saeed as its founder, and N&A participated in the 24 racketeering activity. (FAC ¶¶ 1, 17, 49, 83, 102; Opp’n I 4.) However, the Court 25 finds Plaintiffs allegations insufficient to establish an ongoing organization between 26 Defendant S and N&A. An ongoing organization is “a vehicle for the commission of 27 two or more predicate crimes.” Odom, 486 F.3d at 551. Here, the FAC does not 28 contain factual allegations explaining N&A’s role in the “enterprise” nor explain how 1 the act of holding a meeting in its office is a predicate crime. Gomez v. Guthy-Renker, 2 LLC, No. 14-CV-01425-JGB (KKx), 2015 WL 4270042, at *10 (C.D. Cal. July 13, 3 2015) (listing cases that have dismissed RICO claims based on failure to allege an 4 enterprise’s structure and organization). Accordingly, the Court finds that Plaintiffs 5 have not adequately pled the enterprise prong of a RICO claim. Therefore, 6 Defendants’ motion to dismiss premised upon failure to adequately plead a RICO 7 claim is GRANTED. However, the Court finds it conceivable that Plaintiffs could 8 amend the pleadings to allege facts to establish RICO violations against Defendants, 9 and thus, GRANTS leave to amend. 10 E. SANCTIONS 11 Defendants move for sanctions against Plaintiffs pursuant to Rule 11. 12 Defendants provide three arguments why the Court should levy sanctions. (Mot. III 13 11–24.) First, Plaintiffs misrepresented multiple facts and failed to perform a 14 reasonable and competent inquiry. (Mot. III 11–14.) Second, Plaintiffs’ claims are 15 not legally warranted. (Mot. III 15–22.) Third, by using this RICO action as a sword 16 to harass Defendants, Plaintiffs’ claims have an improper purpose. (Mot. III 22–24.) 17 The reasons proffered by Defendants are all dead-on arrival. The bulk of these 18 arguments are simply a rehash of Defendants motion to dismiss. (Compare Mot. III, 19 with Mot. II.) For the reasons set forth above, the latter two arguments fail. 20 Regarding Defendants’ first argument, the Court cautions Defendants again, that their 21 argument borders the line of frivolous. The FAC explicitly states “agreement.” (FAC 22 ¶¶ 45, 46, 55.) Accordingly, the Court finds that Plaintiff did not conceal the 23 existence of the settlement agreement, but instead expressly disclosed the agreement’s 24 existence. (FAC ¶¶ 45, 46, 55, 62.) Moreover, at the pleading stage the court declines 25 to look beyond the pleading and make determinations of facts as to whether the 26 settlement agreement contained environmental concessions, a hotly disputed topic. 27 (Mot. III 14.) Lastly, Defendants cite to no legal authority supporting the proposition 28 that Plaintiffs are required to disclose other CEQA cases filed against Plaintiffs. (Mot. II 15.) Accordingly, this argument also fails. Therefore, Defendants motion for 2 || sanctions is DENIED. 3 Parties are cautioned that this Court shall not tolerate frivolous filings or 4|| arguments, bad faith negotiation tactics, or the use of ellipses to mischaracterize 5 || statements. Future conduct that abut these affronts to the Court may result in Parties 6 || being ordered to show cause as to why the Court should not issue sanctions. 7 VI. CONCLUSION 8 For the reasons set forth above, the Court GRANTS the Defendants’ Motion to 9 || Dismiss (ECF Nos. 22, 23); DENIES Defendants’ Motion for Sanctions (ECF 10 || No. 34); DENIES Defendants’ Motion for in camera review at the pleading stage. 11 || (ECF No. 24.) Lastly, the Court GRANTS Plaintiff leave to amend their FAC. Said 12 | amended pleading shall be filed within 21 days of this order. 13 14 IT IS SO ORDERED. 15 16 May 18, 2020 “ 17 ‘ “

19 OTIS D. WRIGHT, II 50 UNITED STATES DISTRICT JUDGE

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