Solar Integrated Roofing Corp. v. Massey

District Court, S.D. California·Decided September 11, 2024·No. 3:23-cv-02323·Unknown

Opinion

1 2 3 4 5 6 7 10 11 SOLAR INTEGRATED ROOFING Case No.: 23-cv-2323-MMA (AHG) CORP., 12 ORDER: Plaintiff, 13 v. GRANTING DEFENDANT 14 METTIAS’S MOTION TO DISMISS DAVID M. MASSEY; LAURA 15 METTIAS; DOES 1 through 10, [Doc. No. 34] 16

Defendants. MASSEY’S MOTION TO DISMISS 18

19 [Doc. No. 36] 20

21 22 Solar Integrated Roofing Corp. (“SIRC” or “Plaintiff”) filed this civil action on 23 December 20, 2023 alleging Defendants David M. Massey and Laura Mettias committed 24 securities violations, fraud, negligence, conversion, unjust enrichment, breach of 25 fiduciary duties, and violations of the Racketeer Influenced and Corrupt Organizations 26 (“RICO”) Act. See Doc. No. 1. On April 30, 2024, default judgment was entered against 27 Defendant Massey because he had failed to respond to the summons issued by the Court 28 on December 21, 2023. Doc. No. 14. 1 On March 8, 2024, Defendant Mettias filed a Motion to Dismiss pursuant to 2 Federal Rule of Civil Procedure 12(b)(6), which the Court granted with leave to amend 3 on May 3, 2024. See Doc. Nos. 8, 8-1, 15. Defendant Massey then filed a Motion to Set 4 Aside Default Judgment, which the Court granted on June 24, 2024. See Doc Nos. 17, 5 35. Plaintiff filed an amended complaint on June 3, 2024, which is the operative pleading 6 in this case. Doc. No. 26 (First Amended Complaint, the “FAC”). 7 Both Defendants have now filed Motions to Dismiss pursuant to Federal Rule of 8 Civil Procedure 12(b). See Doc. Nos. 34, 36. Plaintiff has filed an Opposition to each 9 motion, and Defendants have filed Replies. Doc. Nos. 37–38, 40–41. The Court found 10 the matters suitable for determination on the papers and without oral argument pursuant 11 to Federal Rule of Civil Procedure 78(b) and Civil Local Rule 7.1.d.1. See Doc. Nos. 39, 12 42. For the reasons discussed below, the Court GRANTS both Defendant Mettias’s and 13 Defendant Massey’s Motions to Dismiss without prejudice and with leave to amend, 14 except as to Count III which is dismissed with prejudice. 15 I. BACKGROUND1 16 Defendant Massey was the Chief Executive Officer and a member of the Board of 17 Directors (“Board” or “the Board”) of SIRC. FAC ¶¶ 2, 18–19. In February of 2020, 18 SIRC’s Board issued Massey 5,000,000 shares of Class B SIRC stock worth 19 $1,500,000.00 as compensation after Massey allegedly told the Board he had not received 20 any compensation for his services for that year. Id. ¶¶ 18–20. The Board issued Massey 21 another 1,500,000 Class B shares four months later, again for compensation. Id. ¶ 21. 22 Both of these stock transfers were executed even though Massey had in fact received 23 compensation for his role as CEO. Id. ¶ 23. In September of 2021, Massey attempted to 24 convince the Board to buy his shares back for $10,000,000.00 but they refused. Id. ¶ 25. 25 26 27 1 Because this matter is before the Court on a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), the Court must accept as true the allegations set forth in the Complaint. See Barker 28 1 2 The Board later agreed to buy 1,000,000 shares for $2,000,000.00 in lieu of 3 compensation, which Massey had again allegedly already received. Id. 4 According to SIRC, Massey created a shell company, SIRC, LLC, in June of 2021 5 as a vehicle to transfer his remaining SIRC stock and improperly profit from the 6 transaction. Id. ¶¶ 26–27. Using SIRC, LLC, Massey allegedly committed several 7 securities violations in his attempt to transfer and sell SIRC stock. Id. ¶¶ 35–41. 8 Ultimately, the FBI seized 6,258,96 SIRC shares on August 25, 2023. Id. ¶ 41. 9 SIRC also alleges Massey committed various instances of “reckless 10 mismanagement” of SIRC’s business, including serious accounting discrepancies, “toxic 11 debts,” regulatory noncompliance, a lack of due diligence in hiring and acquisitions, 12 gambling with SIRC funds, using SIRC money for personal expenditures, and lying to 13 investors. Id. ¶¶ 42–62. 14 SIRC further contends that Massey and Mettias agreed to prepare and submit false 15 loan applications to the Paycheck Protection Program (“PPP”), which provided Small 16 Business Administration (“SBA”) loans to businesses who were affected by the COVID- 17 19 pandemic. Id. ¶ 64. According to SIRC, Massey and Mettias lied about the number of 18 SIRC employees on the applications, thereby securing $6,375,014.00 in PPP loan 19 proceeds. Id. ¶¶ 66–67. Massey then paid Mettias $637,501.70, representing 10% of the 20 loan proceeds and Mettias divided this amount between herself and Massey. Id. ¶¶ 66– 21 67. 22 Plaintiff alleges it suffered significant financial and reputational damage as a result 23 of Massey’s and Mettias’s misconduct and seeks $100,000,000.00 in economic damages 24 and $1,000,000,000.00 in punitive damages. Id. at 25.2 25 26 27 28 2 A Rule 12(b)(6)3 motion to dismiss tests the sufficiency of the complaint. Navarro 3 v. Block, 250 F.3d 729, 732 (9th Cir. 2001). “While a complaint attacked by a Rule 4 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff’s 5 obligation to provide the grounds of his entitlement to relief requires more than labels and 6 conclusions, and a formulaic recitation of the elements of a cause of action will not do. 7 Factual allegations must be enough to raise a right to relief above the speculative level.” 8 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotations, brackets, and 9 citations omitted). 10 In reviewing a motion to dismiss under Rule 12(b)(6), the court must assume the 11 truth of all factual allegations and must construe them in the light most favorable to the 12 nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337–38 (9th Cir. 1996). 13 Legal conclusions need not be taken as true merely because they are cast in the form of 14 factual allegations. Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987); W. 15 Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). Similarly, “conclusory 16 allegations of law and unwarranted inferences are not sufficient to defeat a motion to 17 dismiss.” Pareto v. Fed. Deposit Ins. Corp., 139 F.3d 696, 699 (9th Cir. 1998). In 18 determining the propriety of a Rule 12(b)(6) dismissal, generally, a court may not look 19 beyond the complaint for additional facts. United States v. Ritchie, 342 F.3d 903, 908 20 (9th Cir. 2003); Parrino v. FHP, Inc., 146 F.3d 699, 705–06 (9th Cir. 1998). 22 Massey first argues the FAC violates Rule 8 because it is a “shotgun” pleading. 23 Doc. No. 36-1 at 8–10. Massey also seeks dismissal of Count I of the FAC because it 24 does not sufficiently allege a violation of the Securities Exchange Act of 1934 (the 25 “Exchange Act”), nor does it satisfy the pleading requirements of the Private Securities 26 27 28 1 Litigation Reform Act (“PSLRA”). Id. at 10–13. Mettias and Massey seek dismissal of 2 SIRC’s fraud claim in Count II, arguing that SIRC fails to satisfy Rule 9(b)’s particularity 3 requirement. Id. at 14–17; Doc. No. 34-1 at 8–10. They seek dismissal of the remaining 4 counts for failure to allege sufficient facts under Rule 12(b)(6). Doc. No. 34-1 at 10–20; 5 Doc. No. 36-1 at 17–30.

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Defendants. MASSEY’S MOTION TO DISMISS 18

19 [Doc. No. 36] 20

3 15 U.S.C. § 78j(b). 4 “In a typical § 10(b) private action a plaintiff must prove (1) a material 5 misrepresentation or omission by the defendant; (2) scienter; (3) a connection between 6 the misrepresentation or omission and the purchase or sale of a security; (4) reliance upon 7 the misrepresentation or omission; (5) economic loss; and (6) loss causation. Stoneridge 8 Inv. Partners, LLC v. Scientific-Atlanta, 552 U.S. 148, 157 (2008). “At the pleading 9 stage, a complaint stating claims under section 10(b) . . . must satisfy the dual pleading 10 requirements of Federal Rule of Civil Procedure 9(b) and the [Private Securities 11 Litigation Act (PSLRA)].” Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981, 990 12 (9th Cir. 2009). Rule 9(b) requires that allegations of “fraud or mistake . . . must state 13 with particularity the circumstances constituting fraud.” Fed. R. Civ. P. 9(b). The 14 “circumstances” required by Rule 9(b) are the “who, what, when, where, and how” of the 15 fraudulent activity. Vess v. Ciba–Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003); 16 Neubronner v. Milken, 6 F.3d 666, 672 (9th Cir. 1993). In addition, the allegations “must 17 set forth what is false or misleading about a statement, and why it is false.” Vess, 317 18 F.3d at 1106 (quoting In re Glenfed, Inc. Secs. Litig., 42 F.3d 1541, 1548 (9th Cir. 19 1994)). In cases involving multiple defendants, “Rule 9(b) does not allow a complaint to 20 merely lump multiple defendants together but require[s] plaintiffs to differentiate their 21 allegations . . . and inform each defendant separately of the allegations surrounding his 22 alleged participation in the fraud.” Swartz v. KPMG LLP, 476 F.3d 756, 765–66 (9th Cir. 23 2007); see also Pegasus Holdings v. Veterinary Ctrs. of Am., Inc., 38 F. Supp. 2d 1158, 24 1163 (C.D. Cal. 1998) (where an action involves multiple defendants, a plaintiff “must 25 provide each and every defendant with enough information to enable them to know what 26 misrepresentations are attributable to them and what fraudulent conduct they are charged 27 with.”) (citations omitted). Further, “[a]ll securities fraud complaints since 1995 . . . are 28 subject to the more exacting pleading requirements of the PSLRA,” which requires a 1 plaintiff to “plead with particularity both falsity and scienter.” Zucco Partners, LLC v. 2 Digimarc Corp., 552 F.3d at 991. “[W]hen “determining whether the pleaded facts give 3 rise to a ‘strong’ inference of scienter, the court must take into account plausible 4 opposing inferences” Id. (citing Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 5 308, 322–23 (2007)). 6 1. Material Misrepresentation 7 The PSLRA requires a plaintiff to “‘specify each statement alleged to have been 8 misleading, the reason or reasons why the statement is misleading, and, if an allegation 9 regarding the statement or omission is made on information and belief, . . . state with 10 particularity all facts on which that belief is formed.’” Id. at 990–91 (quoting Gomper v. 11 VISX, Inc., 298 F.3d 893, 895 (9th Cir. 2002) and 15 U.S.C. § 78u–4(b)(1)). In the 12 FAC’s 70 paragraphs of facts, there are six allegations that are or could be construed as a 13 misleading statement or misrepresentation: (1) Massey “represented” to the Board he was 14 not compensated for his role as CEO of SIRC in 2020, FAC ¶ 18; (2) Massey told an 15 investor in March of 2023 that SIRC’s share price would reach $0.20 in the next 30 days, 16 id. ¶ 54; (3) Massey told a journalist in February of 2023 that he had secured funding for 17 SIRC, id. ¶ 56; (4) Massey submitted false PPP loan applications, id. ¶ 67; (5) Massey 18 told a shareholder that “My counsel told me not to speak to shareholders anymore,” id. 19 ¶ 60; and (6) Massey told a shareholder that “I’ve been advised I cannot communicate 20 with shareholders anymore so I cannot take your calls for McCanna’s [sic] affective [sic] 21 for 10 as effective I cannot talk to you,” id. Massey contends SIRC has not adequately 22 identified specific statements made by Massey and why they are misleading. Doc. No. 23 36-1 at 10–12. The Court agrees. 24 a. Representation to the Board About Compensation 25 SIRC bases its claim that Massey lied to the Board about his 2020 compensation 26 on Exhibits 1–3. See FAC ¶¶ 17–21. Exhibit 1 is a W-2 Wage and Tax Statement for 27 David Massey which reflects that Workforce Business Services paid him $92,077.00 for 28 the 2020 tax year. See FAC at pp. 28. SIRC asserts Workforce Business Services is the 1 payroll company for SIRC. Id. at pp. 5 fn.1. Exhibit 2 is a document, signed in February 2 of 2020, entitled “Written Consent of the Board of Directors of Solar Integrated Roofing 3 Corporation,” which contains the statements “David Massey has been serving as the 4 Company’s CEO and President since 2015 and Robert N. Jones has been serving as 5 Company’s CFO since January 2019.” Id. at 30. Exhibit 2 next states that “Mr. Massey 6 and Mr. Jones have not received compensation for their services,” and that the Board 7 wishes to issue five million shares of preferred stock to Massey and three million shares 8 of preferred stock to Jones. Id. at 30. Exhibit 3 is another document, dated June of 2020, 9 entitled “Written Consent of the Board of Directors of Solar Integrated Roofing 10 Corporation,” stating that the Board “wishes to issue 1,500,000 shares of Series B 11 preferred stock to David Massey for his services as CEO of the Company.” Id. at 32. 12 Although SIRC states Massey “represented” to the Board that he was not 13 compensated for his 2020 work as CEO, it does not plead Massey made any specific 14 statement about his compensation, and Exhibits 2 and 3 do not identify Massey as the 15 speaker or source of the Board’s statements that he had not received compensation for his 16 role as CEO. FAC ¶¶ 17–21, 30–32. Further, SIRC provides no detail about the facts 17 and circumstances surrounding when Massey made any statement or to whom he made 18 any statement about his compensation. FAC ¶¶ 17–21. At bottom, the PSLRA requires a 19 plaintiff to “specify each statement alleged to have been misleading, ” Zucco Partners, 20 LLC, 552 F.3d at 990–91, and SIRC identifies no statement made by Massey with respect 21 to his compensation. Accordingly, SIRC has not adequately pleaded its securities fraud 22 claim based on Massey’s representation to the Board about compensation. 23 b. Statements to Investors and a Journalist 24 As noted above, SIRC pleads several statements that Massey made to investors and 25 a journalist. SIRC vaguely alleges that the funding statement to the journalist was false. 26 FAC ¶ 56. Apart from that allegation, SIRC does not plead Massey’s statements to 27 investors regarding SIRC’s share price or his statements telling investors that he could no 28 longer communicate with them on advice of counsel were false. Nor does SIRC allege 1 how any of these statements were misleading. Absent more information as to how these 2 statements were false or misleading, SIRC’s claim does not comply with the PSLRA. 3 c. PPP Loan Applications 4 Assuming Massey’s verification of the PPP loan applications were statements, 5 SIRC has plausibly alleged they were false because they contained inflated employees 6 numbers. See FAC ¶ 67. However, SIRC has not plausibly alleged any connection 7 between the false PPP loan applications and the purchase or sale of a security. See 8 Stoneridge Inv. Partners, LLC, 552 U.S. at 15. Consequently, SIRC does not adequately 9 plead his securities fraud claim based upon the PPP loan applications. 10 2. Scienter 11 “The required state of mind under the PSLRA is a ‘mental state embracing intent 12 to deceive, manipulate, or defraud,’” and in the Ninth Circuit, it includes recklessness. 13 See Stoneridge Inv. Partners, LLC, 552 U.S. at 157; Inchen Huang v. Higgins, 443 F. 14 Supp. 3d 1031, 1042 (N.D. Cal. March 11, 2020) (quoting Ernst & Ernst v. Hochfelder, 15 425 U.S. 185, 193–94 n.12 (1976). To satisfy the scienter requirement of the PSLRA, 16 SIRC must plausibly allege “with particularity facts giving rise to a strong inference that 17 the defendant acted with the required state of mind” when he made each statement. Id. at 18 991 (quoting 15 U.S.C. § 78u–4(b)(2)). 19 Assuming SIRC adequately pleads a false or misleading statement, the Court finds 20 that SIRC has alleged sufficient facts to show that Massey intended to “deceive, 21 manipulate, or defraud” when he lied to the Board about his 2020 compensation. FAC 22 ¶¶ 20–23. It has also adequately alleged Massey’s scienter with respect to the PPP loan 23 fraud. FAC ¶ 67. But SIRC has not supported Massey’s alleged scienter with respect to 24 his statements to investors and the journalist. To be sure, there is no information in the 25 FAC explaining whether or how Massey knew those statements were false or even if 26 those statement were in fact false. SIRC also pleads no facts regarding whether he 27 intended to deceive these listeners. 28 1 3. Causation 2 Further, assuming SIRC adequately identifies a material misrepresentation and 3 plausibly alleges that Massey possessed the requisite scienter when he made them, the 4 Court finds that SIRC fails to plead loss causation. In order to sufficiently plead a claim 5 under Section 10(b) of the Exchange Act, a plaintiff must plausibly allege “a causal 6 connection between the material misrepresentation and the loss’ experienced by the 7 plaintiff . . . .” Inchen Huang, 443 F. Supp. 3d at 1043 (quoting Dura Pharm., Inc. v. 8 Broudo, 544 U.S. 336, 342 (2005) (internal quotation marks omitted)). Under Ninth 9 Circuit law, a plaintiff must plead “loss causation” with the particularity required by Rule 10 9(b). Id. (citing Oregon Public Employees Retirement Fund v. Apollo Group Inc., 774 11 F.3d 598, 605 (9th Cir. 2014)). Plaintiff states that Massey’s conduct “directly and 12 proximately caused SIRC’s damages,” but does not allege specific facts which show a 13 causal connection between either Massey’s allegedly false statements about his 14 compensation to the Board or his allegedly illegal and “off-the-books” securities 15 transactions and the damages it seeks beyond this conclusory statement. Id. ¶¶ 72–24. 16 This is insufficient to satisfy Rule 9(b). 17 For all of these reasons, Plaintiff has not provided sufficient, plausible, and specific 18 allegations to state a claim for securities fraud under the PSLRA. The Court therefore 19 GRANTS Massey’s Motion to Dismiss as to Count I without prejudice. 20 C. Count II: Common Law Fraud 21 In Count II, SIRC alleges Massey engaged in common law fraud when he “made 22 false representations of material fact and knowingly concealed material information from 23 SIRC’s Board, siphoned funds for personal expenditures, and engaged in other wrongful 24 conduct outlined herein,” and that Massey and Mettias committed common law fraud by 25 lying on applications for loans under the PPP program and taking the proceeds from the 26 loans for their personal use. FAC ¶75–78. Both Massey and Mettias contend SIRC’s 27 Amended Complaint does not provide the specificity of pleading required by Rule 9(b). 28 See Doc. Nos. 34-1, 36-1. 1 As this Court noted in its May 3, 2024 dismissal order, “due to variances among 2 state laws, failure to allege which state law governs a common law claim is grounds for 3 dismissal.” Romero v. Flowers Bakeries, LLC, No. 14-CV-05189-BLF, 2016 WL 4 469370, at *12 (N.D. Cal. Feb. 8, 2016); see also Moore v. EO Products, LLC, No. 22- 5 cv-7618-JST, 2023 WL 6391480, at *09 (N.D. Cal. Sept. 23, 2023). Assuming that 6 California law, applies, however “The elements of a cause of action for fraud in 7 California are: (a) misrepresentation (false representation, concealment, or 8 nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to 9 induce reliance; (d) justifiable reliance; and (e) resulting damage.’” Kearns v. Ford 10 Motor Co., 567 F.3d 1120, 1126 (9th Cir. 2009) (quoting Engalla v. Permanente Med. 11 Group, Inc., 15 Cal. 4th 951, 974 (1997) (internal quotation marks omitted). 12 As noted above, Rule 9(b) requires that allegations of “fraud or mistake . . . must 13 state with particularity the circumstances constituting fraud.” Fed. R. Civ. P. 9(b). The 14 “circumstances” required by Rule 9(b) are the “who, what, when, where, and how” of the 15 fraudulent activity. Vess v. Ciba–Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003); 16 Neubronner v. Milken, 6 F.3d 666, 672 (9th Cir. 1993). In addition, the allegations “must 17 set forth what is false or misleading about a statement, and why it is false.” Vess, 317 18 F.3d at 1106 (quoting In re Glenfed, Inc. Secs. Litig., 42 F.3d 1541, 1548 (9th Cir. 19 1994)). However, “intent, knowledge, and other conditions of a person’s mind may be 20 alleged generally.” Fed. R. Civ. P. 9(b); see also Neubronner, 6 F.3d at 672. In cases 21 involving multiple defendants, “Rule 9(b) does not allow a complaint to merely lump 22 multiple defendants together but require[s] plaintiffs to differentiate their allegations . . . 23 and inform each defendant separately of the allegations surrounding his alleged 24 participation in the fraud.” Swartz v. KPMG LLP, 476 F.3d 756, 765–66 (9th Cir. 2007); 25 see also Pegasus Holdings v. Veterinary Ctrs. of Am., Inc., 38 F. Supp. 2d 1158, 1163 26 (C.D. Cal. 1998) (where an action involves multiple defendants, a plaintiff “must provide 27 each and every defendant with enough information to enable them to know what 28 1 misrepresentations are attributable to them and what fraudulent conduct they are charged 2 with.”) (citations omitted). 3 1. Lying to the Board about Compensation 4 SIRC alleges Massey “made false representations of material fact and knowingly 5 concealed material information when he lied to SIRC’s Board, siphoned funds for 6 personal expenditures, and engaged in other wrongful conduct.” FAC at ¶¶ 76–78. But 7 SIRC has not explained what or when Massey told the Board about his compensation. 8 SIRC has also not explained with sufficient specificity what funds Massey siphoned, 9 when or how he did so, nor any specifics about the “other wrongful conduct” it alleges 10 Massey engaged in. SIRC has also not plausibly alleged any facts regarding how 11 fraudulent statements by Massey to the Board about his compensation caused its 12 damages. See Lazar v. Superior Court, 12 Cal. 4th 631, 645 (1996) (stating that damage 13 causation “must be pled specifically; general and conclusory allegations do not suffice”). 14 2. PPP Loan Fraud 15 SIRC alleges Massey and Mettias “submitted PPP loan applications for each of 16 SIRC’s subsidiaries . . . [which] falsely represented that SIRC had 532 employees.” FAC 17 ¶¶ 13–10, 67. SIRC then received $6,375,014.00 in PPP loans and Massey paid Mettias 18 $637,501.70 from the loan proceeds. Id. SIRC alleges Mettias divided this money 19 between herself and Massey. Id. ¶¶ 3–20. SIRC claims Massey and Mettias concealed 20 their PPP loan activities from SIRC. Id. ¶¶ 11–12, 22–24. A fraud claim based on 21 concealment requires a plaintiff to plausibly allege: 22 (1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, 23 (3) the defendant must have intentionally concealed or suppressed the fact 24 with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the 25 concealed or suppressed fact, and (5) as a result of the concealment or 26 suppression of the fact, the plaintiff must have sustained damage.” 27 Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC, 162 Cal. App. 4th 858, 868 (Cal. 28 1 Ct. App. 2018) (quoting Marketing West, Inc. v. Sanyo Fisher (USA) Corp., 6 Cal. App. 2 4th 603, 612–613 (Cal. Ct. App. 1992)). 3 SIRC has not plausibly alleged with sufficient specificity the “what, when, and 4 how” of the alleged PPP loan fraud. It has not identified the amount sought on each loan 5 application, when each PPP loan application was submitted and on behalf of what entity, 6 what fraudulent information regarding the number of employees each application 7 contained, how the amount of the loans SIRC received differed from what SIRC and its 8 subsidiaries were entitled to had there been no fraud, the amount of each of the loans the 9 subsidiaries actually received, or how much money Massey received from the loan funds. 10 While Plaintiff states it expects to gain this information in discovery, “the Supreme Court 11 has been clear that discovery cannot cure a facially insufficient pleading.” Whitaker v. 12 Tesla Motors, Inc., 985 F.3d 1172, 1177 (9th Cir. 2021) (citing Iqbal, 556 U.S. at 678– 13 79). “Our case law does not permit plaintiffs to rely on anticipated discovery to satisfy 14 Rules 8 and 12(b)(6); rather, pleadings must assert well-pleaded factual allegations to 15 advance to discovery.” Id. (citing Twombly, 550 U.S. at 559). 16 Further, SIRC has not alleged Mettias had a duty to disclose material facts to 17 SIRC. See Blickman Turkus, LP, LLC, 162 Cal. App. 4th at 868. Nor has SIRC plausibly 18 alleged either Massey or Mettias intended to defraud SIRC, as opposed to the SBA and/or 19 the PPP loan program, because based upon its own pleading, SIRC was not entitled to the 20 $6,375,014.00 in PPP loan money in the first place. SIRC refers to Exhibit 40 as support 21 for the allegations in Count II, which is a portion of an email exchange in which Mettias 22 states she is sending “bills for my personal property” to Massey, and Massey asks for 23 “the payoff for the lease,” which Mettias promises to provide. FAC ¶¶ 65–66; id. at 251– 24 52. But this Exhibit provides no details as to whether, how, or when any PPP loan 25 proceeds were used to pay Mettias’s “bills for her personal property” or a lease. SIRC 26 also refers to Exhibit 41 as support for Count II, which is a portion of an email exchange 27 from Curiel reminding Massey that Massey told him Mettias said SIRC had 532 28 employees, which contradicted SIRC’s Human Resource’s statement that SIRC had 203 1 employees in 2022. FAC ¶¶ 65–66, pp. 254–57. This email also does not provide any 2 details of the PPP loan fraud alleged, such as when Mettias reported a false number of 3 employees on PPP loan applications and on behalf of what entity the applications were 4 submitted. 5 Further, SIRC has not plausibly alleged how, specifically, the fraud caused its 6 damages. See Blickman Turkus, LP, 162 Cal. App. 4th at 868. Plaintiff claims “the 7 concrete loss to SIRC was $637,501.70.” FAC ¶¶ 12–13, 67. But this is simply the 8 amount paid to Mettias for her work submitted the PPP loan applications. SIRC has not 9 explained how this number reflects the actual damages it claims it suffered as a result of 10 the fraud, nor has it explained how those damages – which it vaguely identifies as 11 “ongoing SBA audits related to the PPP loan funds” and negative effects on its business – 12 were caused by Massey’s and Mettias’s actions. 13 Accordingly, the Court GRANTS Massey’s and Mettias’s Motions to Dismiss as 14 to Count II without prejudice. 15 D. Count III: Wire Fraud 16 SIRC alleges in Count III that Massey committed wire fraud in violation of 18 17 U.S.C. § 1343. FAC ¶¶ 79–81. Although SIRC is correct that wire fraud is one of the 18 predicate acts alleged under Count VI, see FAC ¶¶ 90–93, 18 U.S.C. § 1343 is a criminal 19 statute that does not provide for a private, civil cause of action. See Tillman v. Los 20 Angeles County District Attorney’s Office, No. 22-cv-5755-SSS (MAA), 2022 WL 21 19829379, at *2 (C.D. Cal. Sept. 21, 2022) (stating there is no private cause of action for 22 wire fraud under 18 U.S.C. § 1343); Riley v. Quality Loan Serv. Corp., No. 18-cv-1297- 23 WQH (AGS), 2019 WL 157838, at *2 (S.D. Cal. Jan 10, 2019) (concluding that 18 24 U.S.C. § 1343 does not provide a private right of action); Chen v. T.T. Group, No. 14-cv- 25 0138-DOC (DFMx), 2014 WL 12613519, at *1 (C.D. Cal. May 29, 2014) (“18 U.S.C. 26 §§ 1341 and 1343 are criminal wire fraud statutes. They do not create civil causes of 27 action . . . .”). Accordingly, the Court GRANTS Massey’s Motion to Dismiss as to 28 Count III with prejudice. 1 E. Count IV: Negligence 2 In Count IV, SIRC brings a negligence claim against Massey. FAC ¶¶ 82–84. 3 Massey asks the Court to dismiss Count IV because SIRC has failed to identify the 4 applicable state law and because the Amended Complaint is too vague and conclusory to 5 provide notice of the allegations against him. Doc. No. 36-1 at 27–28. 6 As noted above, a plaintiff must specify which state law governs a common law 7 claim. See Romero, 2016 WL 469370, at *12; Moore, 2023 WL 6391480, at *9. 8 Assuming that California law, applies, however, “[t]o establish liability for negligence 9 under [California] law, a plaintiff must prove duty, breach, causation, and damages.” 10 Jackson v. Airbnb, Inc., 639 F. Supp. 3d 994, 1006 (C.D. Cal. 2022) (citing Conroy v. 11 Regents of Univ. of Cal., 45 Cal. 4th 1244, 1250 (2009).) In California, “the required 12 element of legal causation has two components: ‘cause in fact and proximate cause.’” 13 Steinle v. United States, 17 F.4th 819, 823 (9th Cir. 2021) (quoting S. Coast Framing, 14 Inc. v. Workers’ Comp. Appeals Bd., 61 Cal. 4th 291, 198 (2015).) 15 To determine causation in fact, California has adopted the substantial factor test set forth in the Restatement Second of Torts, Section 431. “An event will 16 be considered a substantial factor in bringing about harm if it is recognizable 17 as having an appreciable effect in bringing it about.” Kumaraperu v. Feldsted, 237 Cal. App. 4th 60, 68, 187 Cal. Rptr. 3d 583 (2015) (internal citations and 18 quotation marks omitted). An “actor’s negligent conduct is not a substantial 19 factor in bringing about harm to another if the harm would have been sustained even if the actor had not been negligent.” Mills v. U.S. Bank, 166 20 Cal. App. 4th 871, 899, 83 Cal.Rptr.3d 146 (2008) (internal citations and 21 quotation marks omitted) (emphasis removed) (citing Viner v. Sweet, 30 Cal. 4th 1232, 1240, 135 Cal. Rptr. 2d 629, 70 P.3d 1046 (2003)). 22

23 Bhatia v. Silvergate Bank, __ F. Supp. 3d __, 2024 WL 1199679, at *23 (S.D. Cal. March 24 20, 2024). 25 SIRC has not adequately identified what duty Massey had to SIRC; it simply 26 asserts Massey had a “tort duty to SIRC.” FAC ¶ 83. With respect to causation, SIRC 27 states in support of Count IV that Massey’s “material breaches [of] his tort duties directly 28 and proximately caused SIRC’s damages.” Id. This is simply a restatement of the law. 1 SIRC has not provided sufficient facts to plausibly allege how Massey’s breach of his 2 duties had “an appreciable effect in bringing . . . about” the $100,000,000.00 in damages 3 it alleges it suffered. Bhatia, 2024 WL 1199679, at *23. As it stands, the Amended 4 Complaint simply restates the element of causation and as such is not sufficient to 5 plausibly allege any breach of duty by Massey caused the economic damages SIRC 6 claims it suffered. Accordingly, the Court GRANTS Massey’s Motion to Dismiss as to 7 Count IV without prejudice. 8 F. Count V: Conversion 9 In Count V, SIRC alleges that Massey and Mettias “exercised unauthorized control 10 over SIRC’s assets” and “divert[ed] PPP loan proceeds to personal use in collaboration 11 with Mr. Massey.” FAC ¶¶ 85–89. In California, “[t]he elements of a claim for 12 conversion are (1) the plaintiff’s ownership or right to possession of the property at the 13 time of the conversion, (2) the defendant’s conversion by a wrongful act or disposition of 14 property rights, and (3) damages.” Miller v. Bank of America, N.A., No. 1:21-cv-00337- 15 JLT, 2022 WL 3704093, at *4 (E.D. Cal. Aug. 26, 2022) (citing Prakashpalan v. 16 Engstrom, Lipscomb & Lack, 223 Cal. App. 4th 1105, 1135 (Cal. Ct. App. 2014)). 17 Money can only be the subject of a conversion claim if “a specific, identifiable sum is 18 involved.” Ortega v. Toyota Motor Sales, USA, Inc., 572 F. Supp. 2d 1218, 1220 (S.D. 19 Cal. 2008) (citing Farmers Ins. Exch. v. Zerin, 53 Cal. App. 4th 445, 452 (Cal. Ct. App. 20 1997)). 21 SIRC claims Massey converted its assets by “(a) selling restricted shares obtained 22 through deceit, (b) misappropriating company funds for personal use, . . . and 23 (d) engaging in illegal off-the-books transactions with shares of SIRC stock through the 24 shell company ‘SIRC, LLC.’” FAC ¶ 86. With respect to these allegations, SIRC does 25 not identify a specific, identifiable sum that Massey is alleged to have converted through 26 his sale of SIRC stock or a specific amount of money that Massey misappropriated from 28 1 SIRC also alleges Massey and Mettias converted SIRC’s assets to their own use by 2 diverting PPP loan proceeds for personal gain. Id. ¶ 87. Given SIRC’s contention that 3 the PPP loans they received were fraudulently obtained, it does not appear SIRC has 4 plausibly alleged they owned or had a right to own the PPP funds. See Miller, 2022 WL 5 3704093, at *4; Prakashpalan, 223 Cal. App. 4th at 1135. With respect to Massey, SIRC 6 has not identified a specific sum of money Massey allegedly received from the PPP loan 7 proceeds, and explicitly acknowledges that “[t]he exact amounts of [the PPP loan 8 proceeds] shared with Mr. Massey are unknown to SIRC at this time . . . .” FAC ¶ 67. 9 As to Mettias, SIRC alleges she received a total of $637,501.70, her agreed-upon fee for 10 submitting the allegedly fraudulent loans. Id. According to SIRC, the normal and 11 customary fee for Mettias’s services would have been $50,000. Id. But SIRC’s 12 Amended Complaint simply lists the amounts Mettias was paid by each of SIRC’s 13 subsidiaries and does not sufficiently allege that the $637,501.70 came from PPP loan 14 proceeds or that Mettias gained that amount by a wrongful act rather than as simply 15 payment for her services. 16 Accordingly, the Court GRANTS Massey’s and Mettias’s Motions to Dismiss as 17 to Count V without prejudice. 18 G. Count VI: RICO Violations 19 SIRC alleges in Count VI that Mettias and Massey engaged in racketeering 20 activity, in violation of 18 U.S.C. § 1961, et seq., the federal civil RICO Act. FAC 21 ¶¶ 90–93. A private individual may bring a RICO action pursuant to 18 U.S.C. § 1964(c) 22 if they have been “injured in [their] business or property by reason of a violation of 23 § 1962.” Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985); Bridge v. Phoenix 24 Bond & Indem. Co., 553 U.S. 639, 647 (2008). To state a RICO claim under § 1962, a 25 plaintiff must allege “(1) conduct (2) of an enterprise (3) through a pattern (4) of 26 racketeering activity.” Sedima, 473 U.S. at 496. A plaintiff must also allege the RICO 27 activity caused injury to his business or property. Living Designs, Inc. v. E.I Dupont de 28 Numours & Co., 431 F.3d 353, 361 (9th Cir.) 1 SIRC alleges that Massey “through his position in SIRC, operated as part of an 2 enterprise and engaged in a pattern of racketeering activity,” which it identifies as 3 “multiple acts of securities fraud in violation of 15 U.S.C. § 78j(b) and wire fraud in 4 violation of 18 U.S.C. § 1343.” FAC ¶ 91. SIRC also alleges that together, Mettias and 5 Massey “executed a fraudulent scheme involving the misappropriation of PPP funds,” 6 and “made false representations to the Board and PPP lenders” by “submitting deceptive 7 applications for PPP funds, which were then diverted for personal expenditures rather 8 than for the legitimate business purposes of SIRC.” Id. ¶ 92. According to SIRC, this 9 activity also included wire fraud, in violation of 18 U.S.C. § 1343, as well as “potentially 10 other federal statutes.” Id. The Court concludes SIRC has not plausibly alleged all 11 elements of a RICO claim. 12 1. The Enterprise 13 The Supreme Court has held the term “conduct” encompasses an element of 14 direction. “In order to ‘participate, directly or indirectly, in the conduct of such 15 enterprise’s affairs,’ one must have some part in directing those affairs.” Reves v. Ernst 16 & Young, 507 U.S. 170, 179 (1993). “Simply being ‘a part’ of the enterprise or 17 ‘performing services’ for the enterprise does not rise to the level of direction required to 18 satisfy this element.” LD v. United Behavioral Health, 508 F. Supp. 3d 583, 602 (N.D. 19 Cal. Dec. 18, 2020) (citing Walter v. Drayson, 538 F.3d 1244, 1249 (9th Cir. 2008)). The 20 RICO statute defines “enterprise” as “any individual, partnership, corporation, 21 association, or other legal entity, and any union or group of individuals associated in fact 22 although not a legal entity.” 18 U.S.C. § 1961(4). “[T]o establish liability under section 23 1962(c), one must allege and prove the existence of two distinct entities: (1) a ‘person’; 24 and (2) an ‘enterprise’ that is not simply the same ‘person’ referred to by a different 25 name.” Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 161 (2001). 26 SIRC’s allegations do not sufficiently define the alleged “enterprise.” SIRC 27 alleges that Massey, “through his position in SIRC, operated as part of an enterprise” by 28 “misleading the Board to trigger stock issuances, illegal securities transactions, selling 1 restricted shares in off-the-books transactions, and making false and deceptive statements 2 and practices.” FAC ¶ 91. These allegations appear to suggest that SIRC itself is the 3 enterprise. See Moran v. Bromma, 675 Fed. App’x 641, 645 (9th Cir. 2017) (stating that 4 “a corporate officer is sufficiently distinct from the corporation for which he works such 5 that a plaintiff can allege the officer as the RICO person and the corporation as the RICO 6 enterprise”). But SIRC also alleges Massey and Mettias agreed to participate together in 7 a “fraudulent scheme” to submit false PPP loan applications which inflated the number of 8 SIRC’s employees; they would then retain 10% of the fraudulently obtained loan 9 proceeds for themselves. Id. ¶ 67. The RICO statute defines “enterprise” to include “any 10 union or group of individuals associated in fact although not a legal entity.” 18 U.S.C. 11 § 1961(4). The Supreme Court has interpreted this language to mean that “RICO reaches 12 ‘a group of persons associated together for a common purpose of engaging in a course of 13 conduct.’” Boyle v. U.S., 556 U.S. 938, 948 (2009) (quoting U.S. v. Turkette, 452 U.S. 14 576, 583 (1981)). The allegations regarding the PPP loan fraud appear to suggest that the 15 enterprise is an association between Massey and Mettias. Without further clarity, the 16 Court finds that SIRC has not plausibly alleged or defined the required “enterprise.” 17 2. Pattern of Racketeering Activity 18 To establish a “pattern,” a plaintiff must show “at least two acts of racketeering 19 activity” within a ten-year period. 18 U.S.C. § 1961(5). “Racketeering activity” is 20 defined in 18 U.S.C. § 1961(1), which lists dozens of criminal acts. “A ‘pattern’ of 21 racketeering activity also requires proof that the racketeering predicates are related and 22 ‘that they amount to or pose a threat of continued criminal activity.’” Turner v. Cook, 23 362 F.3d 1219, 1229 (9th Cir. 2004) (quoting H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 24 239 (1989)). “Predicate acts are related if they have ‘the same or similar purposes, 25 results, participants, victims, or methods of commission, or otherwise are interrelated by 26 distinguishing characteristics and are not isolated events.’” Metaxas v. Lee, 503 F. Supp. 27 3d 923, 941 (N.D. Cal. Nov. 30, 2020) (quoting H.J. Inc., 492 U.S. at 240)). “Continuity 28 has been interpreted as encompassing ‘both a closed- and open-ended concept . . . .’” Id. 1 (quoting H.J. Inc., 492 U.S. at 241). “Closed-ended continuity entails ‘a series of related 2 predicates extending over a substantial period of time,” i.e., more than “a few weeks or 3 months,” while “[o]pen-ended continuity involves ‘past conduct that by its nature 4 projects into the future with a threat of repetition.’” Id. (quoting H.J. Inc., 492 U.S. at 5 241). 6 SIRC alleges Massey engaged in a “pattern of racketeering” by engaging in wire 7 fraud and securities fraud, more specifically misleading the Board to trigger stock 8 issuances, “illegal securities transactions, selling restricted shares in off-the-books 9 transactions.” FAC ¶ 91. Although wire fraud is a predicate offense under the RICO 10 statute, the PSLRA amended the statute to state that “no person may rely upon any 11 conduct that would have been actionable as fraud in the purchase or sale of securities to 12 establish a violation of [RICO].” 18 U.S.C. §§ 1961(1), 1964(c); Rezner v. Bayerishce 13 Hypo-Und Vereinsbank AG, 630 F.3d 866, 871 (9th Cir. 2010). Accordingly, securities 14 fraud cannot be relied upon as a predicate act. 15 SIRC also alleges Massey “[made] false and deceptive statements.” FAC ¶ 91. 16 Assuming this refers to SIRC’s allegation that Massey lied to the Board about his 17 compensation, as discussed above, SIRC has not plausibly alleged that Massey falsely 18 told the Board he was not compensated for his role as CEO in 2020. SIRC has also not 19 sufficiently explained how Massey’s and Mettias’s actions, other than the alleged wire 20 fraud, fall under the enumerated RICO offenses in 18 U.S.C. § 1361. SIRC’s allegations 21 against Massey’s and Mettias’s participation in the PPP loan fraud are also not sufficient 22 to plausibly allege a racketeering activity. Where fraud is alleged as the predicate acts to 23 a RICO claim, the allegations must satisfy Rule 9(b)’s specificity requirement. Edwards 24 v. Marin Park, Inc., 356 F.3d 1058, 1066 (9th Cir. 2004). As discussed above, SIRC’s 25 fraud allegations are insufficient to satisfy Rule 9(b). 26 3. Causation 27 “[T]o state a claim under civil RICO, the plaintiff is required to show that a RICO 28 predicate offense “not only was a ‘but for’ cause of his injury, but was the proximate 1 cause as well.” Hemi Group, LLC v. City of New York, N.Y., 559 U.S. 1, 9 (2010) 2 (quoting Holmes v. Securities Investor Protector Corp., 503 U.S. 258, 268 (1992)). 3 “When a court evaluates a RICO claim for proximate causation, the central question it 4 must ask is whether the alleged violation led directly to the plaintiff’s injuries.” Anza v. 5 Ideal Supply Corp., 547 U.S. 451, 461 (2006). A plaintiff must show a “direct relation 6 between the injury asserted and the injurious conduct alleged.” Painters & Allied Trades 7 Dist. Council 82 Health Care Fund v. Takeda Pharmaceuticals Co. Ltd., 943 F.3d 1243, 8 1249 (9th Cir. 2019) (quoting Holmes, 503 U.S. at 269–70)). Although SIRC alleges 9 damages in the amount of $100,000,000.00, it does not plausibly allege a direct 10 relationship between Massey’s and Mettias’s racketeering activity and the damages it 11 claims it suffered or how that activity proximately caused the damages. 12 For these reasons, the Court GRANTS Massey’s and Mettias’s motion to dismiss 13 Count VI without prejudice. 14 H. Count VII: Unjust Enrichment 15 “There is no cause of action in California labeled ‘unjust enrichment.’” City of 16 Oakland v. Oakland Raiders, 83 Cal. App. 5th 458, 477 (Cal. Ct. App. 2022); see also 17 Sepanossian v. National Ready Mix Co., Inc., 97 Cal. App. 5th 192, 206–07 (Cal. Ct. 18 App. 2023) (stating that “an unjust enrichment claim is grounded in equitable principles 19 of restitution”); Helems v. Game Time Supplements, LLC, No. 22-cv-1122-L (AHG), 20 2023 WL 5986130, at *6 (stating that “there is no unjust enrichment cause of action in 21 California, instead there is only a claim for restitution”). Rather, “[u]njust enrichment is 22 synonymous with restitution. Durell v. Sharp Healthcare, 183 Cal. App. 4th 1350, 1370 23 (Cal. Ct. App. 2010). In California, “[r]estitution is a quasi-contract theory, which allows 24 for ‘the return of the excess of what the plaintiff gave the defendant over the value of 25 what the plaintiff received [citation] where the benefit to the defendant was conferred 26 through fraud, duress, conversion, or similar conduct.” Echo & Rig Sacramento, LLC v. 27 AmGuard Insurance Co., 698 F. Supp. 3d 1210, 1218 (E.D. Cal. Oct. 18, 2023). 28 1 SIRC alleges Massey unjustly enriched himself at SIRC’s expense by manipulating 2 SIRC’s stock, engaging in unauthorized securities transactions, including off-the-books 3 securities transactions, and siphoning off SIRC’s assets for personal use. FAC ¶¶ 94–97. 4 SIRC has not explained how Massey manipulated SIRC’s stock or how he benefitted 5 from that manipulation. SIRC claims Massey created a shell corporation, SIRC, LLC, to 6 convert his shares into cash. Id. ¶¶ 26–40. But it is not clear from the Amended 7 Complaint whether Massey actually succeeded in accomplishing this before the FBI 8 seized 6,258,986 shares of SIRC stock. Id. Nor is it clear to the Court what SIRC is 9 referring to when it alleges that Massey “siphoned SIRC’s assets.” Id. ¶ 96. 10 SIRC also alleges Massey and Mettias were unjustly enriched by the $637,501.70 11 they allegedly received from the fraudulent PPP loan funds. But SIRC also alleges those 12 funds came from the United States government via the SBA and the PPP loan program, 13 not SIRC. See Quiby Inc. v. Posey, No. 17-cv-3847-EMC, 2018 WL 732493, at *4 (N.D. 14 Cal. Feb. 6, 2018) (stating that a plaintiff fails to state a claim when asserting a claim for 15 unjust enrichment where the defendant was enriched with money provided to it by 16 someone other than the plaintiff). Following SIRC’s logic, if SIRC was not entitled to 17 the entire $6,375,034.00 because it was obtained via inflated employee numbers, it was 18 also not entitled to all of the $637,501.70 it claims Massey and Mettias took from those 19 funds. Accordingly, SIRC has not plausibly alleged it is entitled to any restitution with 20 respect to the alleged PPP loan fraud. The Court therefore GRANTS Massey’s and 21 Mettias’s Motions to Dismiss as to Count VII without prejudice. 22 I. Count VIII: Breach of Fiduciary Duty 23 SIRC contends Massey breached his fiduciary duty as CEO of SIRC by 24 “manipulating SIRC’s stock, engaging in unauthorized securities transactions, selling 25 restricted shares in of-the-books transactions, making ludicrous business decisions that no 26 reasonable similarly situated CEO would have made, misappropriating company and PPP 27 funds for personal use, committing wire fraud and otherwise violating federal and state 28 law.” FAC ¶¶ 98–101. SIRC also claims Massey made decisions and took actions that 1 were not in the best interests of SIRC, and his business decisions and fraudulent practices 2 “harmed SIRC financially [and] also exposed the company to significant legal and 3 reputational risks.” Id. Massey argues the allegations in Count VIII are too vague and 4 conclusory to state a claim. Doc. No. 36-1 at 27–29. 5 “The elements of a claim for breach of fiduciary duty [in California] are (1) the 6 existence of a fiduciary relationship, (2) its breach, and (3) damage proximately caused 7 by that breach.” O’Neal v. Stanislaus Cnty. Emps.’ Ret. Ass’n, 8 Cal. App. 5th 1184, 8 1215 (Cal. Ct. App. 2017) (internal quotation marks omitted). SIRC plausibly alleges 9 Massey was a director of SIRC, see FAC ¶ 19, and “in California, it is beyond dispute 10 that corporate directors owe a fiduciary duty to the corporation and its shareholders . . .” 11 which requires them to “serve ‘in good faith, in a manner such director believes to be in 12 the best interests of the corporation and its shareholders.’” Berg & Berg Enterprises, 13 LLC v. Boyle, 179 Cal. App. 4th 1020, 1037 (Cal. Ct. App. 2009) (citing Cal. Corp. Code 14 § 309(a)). SIRC also plausibly alleges Massey breached this duty by, among other 15 things, making a financially unsound $4.2 million loan to Arbiter Capital, LLC in 16 exchange for a future loan to SIRC of $42 million which never materialized, took out a 17 loan on behalf of SIRC which had an 88.5% interest rate, entered into a securities 18 transaction with an unlicensed securities dealer who converted SIRC stock at $0.05 when 19 the stock was trading at $0.50, purchased a 60% interest in SunUp Solar LLC despite the 20 fact that it did not have any tangible assets and which resulted in millions of dollars of 21 damages to SIRC, and engaged in insider trading by providing SIRC’s confidential 22 documents to selected investors and a financial journalist. FAC ¶¶ 46–62. 23 As to causation, however, SIRC falls short because it has not plausibly alleged 24 Massey’s conduct “‘was a substantial factor in bringing about the harm to the plaintiff.’” 25 Pacific Select Fund v. Bank of New York Mellon, No. 2012 WL 12886483, at *6 (C.D. 26 Cal. Jan. 30, 2012) (quoting Servs. Emps. Int’l Union, Local 250 v. Colcord, 160 Cal. 27 App. 4th 362, 375 (Cal. Ct. App. 2008)). While SIRC alleges its damages are estimated 28 at $100,000,000 and it was “once valued at $100 million with a share price regularly 1 above $0.30 [and it] now teeters on the brink of insolvency,” it does not sufficiently 2 ||connect Massey’s actions with its current financial condition. SIRC provides insufficient 3 || facts regarding how it would have fared in the absence of Massey’s actions or how, 4 specifically, Massey’s actions damaged SIRC. Accordingly, the Court GRANTS 5 || Massey’s Motion to Dismiss as to Count VIII without prejudice. 7 For the foregoing reasons, the Court GRANTS Massey’s and Mettias’s Motions to 8 || Dismiss and DISMISSES all claims. The dismissal is without prejudice as to all claims 9 ||except Count III. Because amendment would be futile, dismissal of Count HI is with 10 || prejudice. 11 Any amended complaint will be the operative pleading and shall be filed no later 12 October 9, 2024. Defendant must respond within the time prescribed by Federal 13 ||Rule of Civil Procedure 15.4 Any claim not re-alleged and any Defendant not named in 14 || the second amended complaint will be considered waived. See CivLR 15.1; Hal Roach 15 || Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1546 (9th Cir. 1989) (“[AJn 16 |}amended pleading supersedes the original.”); Lacey v. Maricopa Cnty., 693 F.3d 896, 928 17 Cir. 2012) (noting that claims dismissed with leave to amend which are not re- 18 || alleged in an amended pleading may be “considered waived if not repled”’). 20 || Dated: September 11, 2024 21 Mbiduk lu - Leleg llr 22 HON. MICHAEL M. ANELLO United States District Judge 23 24 25 26 || 27 ||4 In addition, the Court notes that any amended pleading must be accompanied by a version of that 3g || pleading that shows—through redlining or similar method—how that pleading differs from the previously dismissed pleading. See CivLR 15.1.c.

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