Brian Rubin et al v. Michael Briscoe et al, No. 2:2012cv10140 - Document 16 (C.D. Cal. 2013)
Court Description: ORDER GRANTING DEFENDANTS MOTION TO DISMISS 9 by Judge Dean D. Pregerson: The Court GRANTS the Divens Defendants motion to dismiss Plaintiffs RICO claim with prejudice.The Court also GRANTS the Divens Defendants motion to dismiss Plaintiffs fraud and breach of contract claims as to the Divens Defendants.Finally, because Plaintiffs RICO claim is pled against all Defendants and Plaintiff has insufficiently alleged an association-in-fact enterprise consisting of all Defendants, the RICO claim is dismissed with prejudice as to all remaining Defendants.Plaintiff cannot possibly win RICO damages against the remaining Defendants as he has failed to allege the existence of an enterprise. For the same reasons as with the state law claims against the Divens Defendants, the Court also dismisses the fraud, breach of contract, and negligence claims as to all remaining Defendants, without prejudice as to their re-filing in state court. ( MD JS-6. Case Terminated ) (lc) Modified on 4/18/2013 (lc).
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Brian Rubin et al v. Michael Briscoe et al Doc. 16 1 2 O 3 4 5 UNITED STATES DISTRICT COURT 6 CENTRAL DISTRICT OF CALIFORNIA 7 8 9 10 11 12 BRIAN RUBIN, an individual; HYDRO THERM TECHNOLOGIES GROUP, LLC, a Tennessee limited liability company, 13 Plaintiffs, 14 15 16 17 18 19 20 21 22 23 24 v. MICHAEL BRISCOE, an individual; WESTBRIDGE MUTUAL, LLC, a California Limited Liability Company; DAYO BEVERLY, an individual; DANNY GOTVALD, an individual; JESSE HATHORN, an individual; JON DIVENS, an individual; CHIP CANTRELL, an individual; LAW OFFICE OF JOHN DIVENS, LLC, a busines entity of unknown form; et al. Defendants. ___________________________ ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No. CV 12-10140 DDP (Ex) ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS [Dkt. No. 9] On November 28, 2012, Plaintiffs Brian Rubin and Hydro Therm 25 Technologies Group, LLC, filed this action against numerous 26 defendants alleging ten causes of action for civil RICO violations, 27 fraud, breach of contract, and negligence. 28 the Court issued an Order to Show Cause requiring Plaintiffs to On December 18, 2012, Dockets.Justia.com 1 file a Federal Claims Case Statement with respect to the RICO 2 claim, to which Plaintiffs responded on January 4, 2013. 3 21, 2013, the Court dismissed Hydro Therm from the case as an 4 improperly joined plaintiff, leaving Rubin as the sole Plaintiff. 5 On March Presently before the Court is the Motion to Dismiss 6 Plaintiff’s Complaint as to Defendants Jon Divens and Law Offices 7 of Jon Divens & Associates, LLC (collectively “Divens Defendants”). 8 (Dkt. No. 9.) 9 arguments therein, the Court GRANTS Defendants’ Motion to Dismiss. 10 I. Having considered the parties’ pleadings and the BACKGROUND 11 Plaintiff’s Complaint alleges a host of facts against eighteen 12 defendants (plus twenty Doe Defendants), many of which are entirely 13 unrelated to the Divens Defendants. 14 Plaintiff Rubin’s claims against the Divens Defendants are recited 15 here. 16 Only the facts relevant to In September 2010, Plaintiff sought to obtain a Standby Letter 17 of Credit (“SBLC”), a financial instrument used in business 18 transactions as proof of a buyer’s credit quality and repayment 19 abilities. 20 obtaining the SBLC, Plaintiff was referred to Defendant Linda 21 Jamison, who in turn referred Plaintiff to Defendant Michael 22 Briscoe, a member of Defendant Unity Bankcard Services, LLC 23 (“UBS”), and Defendants Hilary Whitfield and Tom Okeyo, controlling 24 members of Defendant BDP Worldwide, LLC (“BDP”). 25 61.) 26 Agreement with BDP whereby BDP would procure the SBLC and Plaintiff 27 would contribute $200,000 toward the $500,000 fee to participate in 28 an SBLC funding program. (Compl. ¶¶ 33, 60.) At that time, to assist him with (Id. ¶¶ 13, 20, On September 23, 2010, Plaintiff entered into a Funding (Id. ¶ 62 & Ex. C.) 2 Plaintiff and 1 Whitfield, on behalf of BDP, signed the agreement. 2 Divens, an attorney, drafted the BDP Funding Agreement. 3 62.) 4 account. 5 (Id. Ex. C.) (Id. ¶ Plaintiff wired the $200,000 directly into Divens’s escrow (Id.) On October 1, 2010, BDP, represented by Whitfield, and UBS, 6 represented by Briscoe, entered into a second Funding Agreement 7 whereby UBS would assist BDP in obtaining the SBLC. 8 Ex. D.) 9 $500,000 toward the cost of the SBLC, to be deposited into a (Id. ¶ 63 & The agreement provided that BDP and UBS would each advance 10 designated escrow account. 11 $200,000 was included in the $500,000 that BDP was to contribute 12 pursuant to this agreement, but he was not expressly a party to the 13 agreement or named in its provisions. 14 1, 2010, Briscoe (in his own name, and not as a representative of 15 UBS), BDP (represented by Whitfield), and Divens entered into an 16 Escrow Agreement whereby Divens would serve as the escrow agent for 17 the funds contributed by the other two parties, which would be 18 maintained in Divens’s escrow account. 19 Again, Plaintiff was not a party to or mentioned in the Escrow 20 Agreement. 21 (Id.) Plaintiff alleges that his (Id. ¶ 63.) Also on October (Id. ¶¶ 64-65 & Ex. E.) (Id. Ex. E.) Plaintiff alleges that the SBLC was not obtained and that at 22 some point Divens released the subject funds to an unknown third 23 party without Plaintiff’s knowledge or consent. 24 Plaintiff learned this information, he contacted Divens, Briscoe, 25 Whitfield, Okeyo, and Jamison. 26 conversations, Plaintiff was given an excuse for why the SBLC had 27 not been obtained. 28 Plaintiff that the transaction was delayed because bank personnel (Id.) (Id. ¶ 67.) (Id. ¶ 66.) When In each of these On one occasion, Divens allegedly told 3 1 were on vacation, and on another occasion, Whitfield told Plaintiff 2 not to worry because “Briscoe always closed the deal with the 3 banks.” 4 with Plaintiff, reassuring him in frequent conversations that 5 Plaintiff would obtain the SBLC. 6 Plaintiff’s funds had still not been returned. 7 (Id.) Eventually, only Divens continued to communicate (Id. ¶ 68.) By May 2011, (Id.) At this time, Divens offered to provide his services to 8 Plaintiff, representing that he would help Plaintiff obtain the 9 SBLC and recoup Plaintiff’s $200,000. (Id. ¶ 69.) Divens also 10 allegedly told Plaintiff that Plaintiff’s money was being held by 11 Defendant Pelico International Funding and Development. 12 70.) 13 Agreement whereby Divens would procure and share in the funds from 14 the SBLC. 15 Plaintiff would contribute $210,000 toward the cost of the SBLC. 16 (Id. Ex. F.) 17 possession of Plaintiff’s $200,000, which had been returned from 18 Pelico, and therefore that this amount would be credited toward 19 Plaintiff’s contribution under the Contract Agreement. 20 Plaintiff then paid Divens the $10,000 balance. 21 (Id. ¶ On May 26, 2011, Plaintiff and Divens entered into a Contract (Id. ¶ 71 & Ex. F.) According to the contract, Divens allegedly told Plaintiff that he was in (Id. ¶ 72.) (Id.) In May 2012, Plaintiff demanded from Divens the return of the 22 $210,000. 23 being held in the client trust account of a “major, reputable law 24 firm,” but that he could not disclose the identify of the firm. 25 (Id.) 26 Plaintiff’s money. 27 been funded and Plaintiff’s money had not been returned. 28 75.) (Id. ¶ 73.) Divens told Plaintiff that the money was Divens told Plaintiff that he was therefore unable to return (Id.) As of November 2012, the SBLC had not 4 (Id. ¶ 1 II. LEGAL STANDARD 2 A. 3 Rule 8 of the Federal Rules of Civil Procedure “requires more Rule 12(b)(6) 4 than labels and conclusions, and a formulaic recitation of the 5 elements of a cause of action will not do . . . 6 allegations must be enough to raise a right to relief above the 7 speculative level.” 8 555 (2007). 9 failure to state a claim, “all allegations of material fact are Factual Bell Atlantic Corp. v. Twombly, 550 U.S. 544, When considering a 12(b)(6) motion to dismiss for 10 accepted as true and should be construed in the light most 11 favorable to the plaintiff.” 12 (9th Cir. 2000). 13 Resnick v. Hayes, 213 F.3d 443, 447 A court need not accept as true conclusory allegations or 14 allegations stating a legal conclusion. 15 Litig., 89 F.3d 1399, 1403 (9th Cir. 1996); Iqbal v. Ashcroft, 129 16 S.Ct. 1937, 1940-41 (2009) (“mere conclusions[] are not entitled to 17 the assumption of truth.”). 18 on a Rule 12(b)(6) motion based upon the “lack of a cognizable 19 legal theory” or “the absence of sufficient facts alleged under the 20 cognizable legal theory.” 21 F.2d 696, 699 (9th Cir. 1990). 22 “plausible grounds to infer” that their claims rise “above the 23 speculative level.” Twombly, 127 S. Ct. at 1965. 24 plaintiffs’ obligation requires more than “labels and conclusions” 25 or a “formulaic recitation of the elements of a cause of action.” 26 Id. at 1964-65. 27 /// 28 /// In re Stac Elecs. Sec. A court properly dismisses a complaint Balistreri v. Pacifica Police Dep’t, 901 The plaintiffs must allege 5 That is, the 1 III. DISCUSSION 2 Plaintiff’s claims against the Divens Defendants include civil 3 RICO violations pursuant to 18 U.S.C. § 1962(c) and (d), fraud, and 4 breach of contract. 5 A. 6 Plaintiff’s RICO claim is pled against all Defendants. 7 claim therefore includes, but is not limited to, the Divens 8 Defendants, although only those Defendants’ motion is presently 9 before the Court. 10 RICO The “The Racketeer Influenced and Corrupt Organizations (“RICO”) 11 Act, passed in 1970 as Title IX of the Organized Crime Control Act, 12 provides for both criminal and civil liability.” 13 Corp., 486 F.3d 541, 545 (9th Cir. 2007). 14 1962(c), a plaintiff must allege “(1) conduct (2) of an enterprise 15 (3) through a pattern (4) of racketeering activity.” 16 S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985). 17 Odom v. Microsoft To state a claim under § Sedima, Here, Plaintiff alleges that “[a]ll defendants collectively 18 constitute [an] enterprise” engaged in a racketeering scheme. 19 (Federal Claims Case Statement at 17.) 20 purpose of the enterprise was to defraud Plaintiff of his funds. 21 Specifically, he claims that all of the defendants engaged in wire 22 fraud, 18 U.S.C. § 1343, and money laundering, 18 U.S.C. § 1956 “by 23 accepting the victim’s wire transfers with the intent to defraud 24 the victims out of the money without providing the loan the parties 25 contracted for.” 26 “Defendants attempted to conceal their fraud by shuffling the 27 victims’ funds from various bank accounts; for instance, Defendant 28 Briscoe allegedly transferred HydroTherm’s funds to an unknown law (Id. at 15.) Plaintiff claims that the Plaintiff also claims that 6 1 firm and it is believed that Defendants Morelli and Divens each 2 transferred Plaintiff Rubin’s funds in a similar fashion.” 3 15-16.) 4 (Id. at The first flaw in Plaintiff’s pleadings is that he fails to 5 allege how all of the various defendants—some of whom only 6 transacted with the dismissed plaintiff Hydro Therm—together 7 constitute a single enterprise. 8 section titled “General Allegations Regarding the Criminal 9 Enterprise,” which is broken down into additional sections, Plaintiff’s complaint contains a 10 including a “General Overview of the Scheme,” “Allegations Related 11 to Hydro,” and “Allegations Related to Rubin.” 12 is further divided into two sections: “Allegations Related to the 13 Briscoe/Divens Scheme” and “Allegations Common to the 14 Darkshore/Morelli Scheme.” 15 transactions alleged in these various schemes are distinct from one 16 another and contain no specific allegations of interrelated 17 conduct. 18 RICO cause of action, which incorporates by reference the general 19 allegations and adds conclusory allegations that “the Defendants 20 within the enterprise maintained a relationship with each and every 21 other Defendant for the common purpose of carrying out racketeering 22 activity.” 23 24 25 26 27 (Compl. ¶¶ 32-85.) The latter section All of the Further, the “General Allegations” section precedes the (Id. ¶ 90.) With respect to an association-in-fact enterprise, the type of enterprise Plaintiff alleges here, the Supreme Court has stated: [A]n association-in-fact enterprise must have at least three structural features: a purpose, relationships among those associated with the enterprise, and longevity sufficient to permit these associates to pursue the enterprise’s purpose. As we succinctly put it in Turkette, an association-in-fact enterprise is ‘a 28 7 1 group of persons associated together for a common purpose of engaging in a course of conduct.’ 2 3 Boyle v. United States, 556 U.S. 938, 946 (2009) (quoting United 4 States v. Turkette, 452 U.S. 576, 583 (1981)). 5 complaint alleges that all of the defendants had the common 6 purpose of defrauding the plaintiffs, it fails to allege any 7 relationship among the various defendants. 8 eighteen named defendants were allegedly involved in more than one 9 of the three distinct schemes alleged in the Complaint. Although the Only two of the Defendant 10 Briscoe was allegedly involved in the BDP/UBS scheme that also 11 allegedly involved the Divens Defendants, and Briscoe was 12 allegedly involved in the Hydro Therm scheme, which is no longer 13 at issue in this case. 14 in both schemes related to Rubin—the scheme involving the Divens 15 Defendants and a separate scheme that is not at issue in the 16 motion before the Court. 17 show any relationship between schemes other than that they share a 18 few common participants and the same victim (Plaintiff Rubin). 19 There are no allegations that any of the defendants involved in 20 each of the schemes were even aware of the defendants involved in 21 other schemes. 22 an associated-in-fact RICO enterprise comprised of all of the 23 named defendants, and for similar reasons, the allegations are 24 insufficient to establish a “pattern” of racketeering activity 25 across all of the defendants. 26 F.3d 741, 749 (9th Cir. 2000) (“[M]erely having the same 27 participants is insufficient to establish relatedness. . . . To 28 hold that Plaintiffs have established relatedness solely because Defendant Jamison was allegedly involved However, Plaintiff alleges no facts to This is insufficient to support the existence of See Howard v. Am. Online Inc., 208 8 1 they implicate the same participants makes that requirement 2 virtually meaningless.”). 3 Even if the Court were to read the Complaint as alleging 4 multiple separate enterprises—which it need not do, and which both 5 the Complaint and Plaintiff’s Federal Claims Case Statement make 6 clear is not Plaintiff’s intention—Plaintiff fails to plead the 7 predicate acts engaged in by the Divens Defendants with sufficient 8 particularity to sustain his RICO claim. 9 alleged by Plaintiff are wire fraud and money laundering. The two predicate acts 10 are predicate acts defined by Section 1961 of RICO. 11 Both § 1961(1). 12 See 18 U.S.C. Federal Rule of Civil Procedure 9(b) requires that fraud be 13 pled with particularity. 14 . . ., the circumstances constituting fraud . . . shall be stated 15 with particularity. 16 condition of mind of a person may be averred generally.” 17 9(b) ‘requires the identification of the circumstances 18 constituting fraud so that the defendant can prepare an adequate 19 answer from the allegations.’” Odom, 486 F.3d at 553 (quoting 20 Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 21 1400 (9th Cir. 1986)). “[T]he pleader must state the time, place, 22 and specific content of the false representations as well as the 23 identities of the parties to the misrepresentation.” 24 (internal quotation marks omitted). 25 circumstances of the fraud itself must be alleged with 26 particularity. 27 1547 (9th Cir. 1994). It provides: “In all averments of fraud Malice, intent, knowledge, and other “Rule Id. In short, the factual See In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541, This heightened pleading requirement 28 9 1 applies to fraud-based predicate acts in RICO causes of action. 2 See Odom, 486 F.3d at 553-54. 3 “[A] wire fraud violation consists of (1) the formation of a 4 scheme or artifice to defraud; (2) use of the United States wires 5 or causing a use of the United States wires in furtherance of the 6 scheme; and (3) specific intent to deceive or defraud.” 7 554. 8 Divens’s escrow account, and although the exhibit attached to the 9 Complaint lists a Bank of America account number for Divens, Id. at Although Plaintiff alleges that he wired $200,000 to 10 Plaintiff never specifically alleges when he wired the money, from 11 what institution he wired it, or to which institution it was 12 delivered. 13 allege the dates of his conversations with Divens about the money 14 once he discovered it had been released to “an unknown third 15 party.” 16 paid Divens the additional $10,000 required by the parties’ 17 Contract Agreement. 18 in which Plaintiff participated and wire transfers that he 19 initiated, he should be able “to plead the factual circumstances 20 of the alleged fraud with the requisite level of particularity.” 21 Sanford v. MemberWorks, Inc., 625 F.3d 550, 558-59 (9th Cir. 22 2010). 23 (See Compl. ¶ 62 & Ex. C.) (See Id. ¶¶ 66-70.) Neither does Plaintiff He does not allege when or how he (See Id. ¶ 72.) As these were conversations With respect to the predicate act of money laundering, 18 24 U.S.C. § 1957 “makes it unlawful to ‘knowingly engage[ ] or 25 attempt[ ] to engage in a monetary transaction in criminally 26 derived property of a value greater than $10,000,’ if that 27 property ‘is derived from specified unlawful activity.’” 28 States v. Phillips, 704 F.3d 754, 763 (9th Cir. 2012). 10 United The Divens 1 Defendants’ alleged wire fraud could constitute the “specified 2 unlawful activity” in this case, see 18 U.S.C. § 1957(f)(3); 18 3 U.S.C. §§ 1956(c)(7)(A), 1961(1)(B), however, Plaintiff does not 4 even attempt to connect any particular monetary transactions or 5 unlawful activity to the money laundering predicate, nor does he 6 allege whether the Divens Defendants “had the requisite intent to 7 launder funds in furtherance of a RICO scheme.” 8 371 Fed. App’x. 822, 824 (9th Cir. 2010). 9 10 11 12 13 Desoto v. Condon, Indeed, Plaintiff’s RICO allegations state: Defendants engaged in “racketeering activity” within the meaning of 18 U.S.C. § 1961(1) by engaging in the acts set forth above. The acts set forth above constitute a violation of one or more of the following statutes: 18 U.S.C. § 1343 and 18 U.S.C. § 1957. The Conspiring Defendants and the other conspirators each committed and/or aided and abetted the commission of two or more of these acts of racketeering activity. 14 (Compl. ¶ 92.) 15 To the extent that the particular relevant facts are buried 16 in the “General Allegations” section—the only possible “acts set 17 forth above”—which comprises 54 paragraphs over 11 pages, the 18 Court is not required to sift through the allegations to find the 19 facts that relate to each cause of action. See Izenberg v. ETS 20 Services, LLC, 589 F. Supp. 2d 1193, 1203-04 (C.D. Cal. 2008) 21 (“[T]he court need not guess which activities allegedly constitute 22 predicate acts.”); Graf v. Peoples, 2008 WL 4189657 (C.D. Cal. 23 Sept. 4, 2008) (“Plaintiff’s RICO claims incorporate the 24 Complaint’s initial lengthy description of many different asserted 25 acts of wrongdoing by various Defendants. Plaintiff does not 26 expressly identify any RICO predicate acts, but simply 27 incorporates his previous allegations. 28 11 Such ‘shotgun’ pleading is 1 2 insufficient to plead a RICO claim.”). The Court previously required that the Plaintiff specify 3 precisely the facts that supported his RICO claim in a Federal 4 Claims Case Statement. 5 to clarify the Complaint and fails to expressly answer each of the 6 required categories of information. 7 verbatim different sections of the Complaint, and in certain 8 places, instead of providing the requested information, it refers 9 the Court to a previous section where that information is However, Plaintiff’s statement does little The statement repeats almost 10 purportedly, but not always, provided (for example, the dates of 11 the predicate acts requested in Section 5(b)). 12 Because Plaintiff has insufficiently plead a plausible claim 13 for damages under RICO, the Court grants Defendants’ motion to 14 dismiss this claim with prejudice. 15 B. 16 Plaintiff’s RICO claim provides the sole basis for federal Remaining State Law Claims 17 question jurisdiction. 18 supplemental jurisdiction over state-law claims “that are so 19 related to claims in the action within [the court’s] original 20 jurisdiction that they form part of the same case or controversy 21 under Article III of the United States Constitution,” 28 U.S.C. § 22 1367(a), a court may decline to exercise supplemental jurisdiction 23 where it “has dismissed all claims over which it has original 24 jurisdiction,” id. § 1367(c)(3). 25 of judicial economy, convenience[,] and fairness to litigants” 26 weigh in favor of the exercise of supplemental jurisdiction, “a 27 federal court should hesitate to exercise jurisdiction over state 28 claims.” While federal courts may exercise Indeed, unless “considerations United Mine Workers v. Gibbs, 383 U.S. 715, 726 (1966); 12 1 see also Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 (1988) 2 (“[A] federal court should consider and weigh in each case, and at 3 every stage of the litigation, the values of judicial economy, 4 convenience, fairness, and comity.”). Accordingly, the court declines to exercise its supplemental 5 6 jurisdiction here. 7 IV. 8 9 CONCLUSION Plaintiff has had two opportunities to adequately plead his claims—once in his Complaint, and once in his Federal Claims Case 10 Statement in response to the Court’s Order to Show Cause. 11 Order, the Court warned Plaintiff that “[f]ailure to adequately 12 respond to this Order may result in the dismissal with prejudice 13 of all federal claims for relief.” 14 Court GRANTS the Divens Defendants’ motion to dismiss Plaintiff’s 15 RICO claim with prejudice. In that For the foregoing reasons, the 16 The Court also GRANTS the Divens Defendants’ motion to 17 dismiss Plaintiff’s fraud and breach of contract claims as to the 18 Divens Defendants. 19 Plaintiff’s allegations are serious, and the Court therefore 20 dismisses Plaintiff’s state law claims without prejudice as to his 21 re-filing in state court with appropriate allegations of fraud.1 22 Finally, because Plaintiff’s RICO claim is pled against all The Court recognizes, however, that if true, 23 Defendants and Plaintiff has insufficiently alleged an 24 association-in-fact enterprise consisting of all Defendants, the 25 RICO claim is dismissed with prejudice as to all remaining 26 Defendants. See Sparling v. Hoffman Const. Co., 864 F.2d 635, 638 27 1 28 The Court notes that any relevant statues of limitations are likely subject to equitable tolling. 13 1 (9th Cir. 1988) (“A trial court may act on its own initiative to 2 note the inadequacy of a complaint and dismiss it for failure to 3 state a claim . . . . The court must give notice of its intention 4 to dismiss and give the plaintiff some opportunity to respond 5 unless the plaintiffs cannot possibly win relief.” (internal 6 quotation marks omitted)). 7 damages against the remaining Defendants as he has failed to 8 allege the existence of an enterprise. 9 with the state law claims against the Divens Defendants, the Court Plaintiff cannot possibly win RICO For the same reasons as 10 also dismisses the fraud, breach of contract, and negligence 11 claims as to all remaining Defendants, without prejudice as to 12 their re-filing in state court. 13 IT IS SO ORDERED. 14 15 16 Dated: April 18, 2013 DEAN D. PREGERSON United States District Judge 17 18 19 20 21 22 23 24 25 26 27 28 14
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