Johnson v. Johnson, No. 1:2015cv01793 - Document 54 (E.D. Cal. 2016)
Court Description: ORDER DENYING Plaintiff's 49 Motion for Reconsideration of Motion to Dismiss, signed by Magistrate Judge Michael J. Seng on 11/16/2016. (Kusamura, W)
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1 2 3 4 5 6 7 IN THE UNITED STATES DISTRICT COURT 8 FOR THE EASTERN DISTRICT OF CALIFORNIA 9 10 11 EDWARD J. JOHNSON, 12 13 14 v. GERALD JOHNSON, 15 1:15-cv-01793 MJS Plaintiff, ORDER DENYING PLAINTIFF'S MOTION FOR RECONSIDERATION OF MOTION TO DISMISS (ECF No. 49) Defendant. AMENDED COMPLAINT DUE: January 27, 2017 16 17 18 I. Introduction 19 Before the Court is Plaintiff Edward Johnson’s Motion for Reconsideration of the 20 Court's Order granting Defendant’s motion to dismiss in part and limiting Plaintiff’s RICO 21 claim to post-bankruptcy discharge conduct. (ECF No. 48.) Defendant Gerald Johnson 22 opposed the motion on November 2, 2016, and Plaintiff filed a reply on November 10, 23 2016. (ECF Nos. 51-52.) Having found the matter appropriate for submission upon the 24 record and briefs (See Local Rule 230(g)), and having carefully considered the parties' 25 briefs, Plaintiff’s Motion for Reconsideration is DENIED. 26 /// 27 /// 28 1 1 II. Background 2 A. 3 The Court set forth the relevant facts in its order on the motion to dismiss. Those 4 Factual Background facts remain unchanged. 5 Plaintiff originally sought damages from Defendant for contribution, promissory 6 estoppel, and unjust enrichment resulting from an alleged breach of, and wrongful 7 disassociation from, a real estate investment partnership. 8 On August 2, 2016, Plaintiff filed an additional claim for civil RICO 1 as a 9 counterclaim in reply. (ECF No. 42.) The claim alleged that Defendant engaged in a 10 pattern of criminal activity including acts of tax, real estate, and bankruptcy fraud that 11 resulted in harm to Plaintiff. Defendant and his wife had jointly filed for Chapter 7 12 bankruptcy protection in the Bankruptcy Court for the Eastern District of Pennsylvania in 13 2012, and obtained discharge in May 2013. Plaintiff’s RICO claim was based, in 14 significant part, on Defendant’s alleged pre-discharge criminal activity. 15 Defendant moved to dismiss the counterclaim in reply arguing that Plaintiff was 16 barred from seeking damages for events occurring prior to bankruptcy discharge. (ECF 17 No. 43.) The Court agreed and granted the motion. (ECF No. 48.) Plaintiff filed the 18 instant motion for reconsideration challenging the Court’s order. (ECF No. 49.) 19 B. The Parties' Arguments 20 Plaintiff seeks review of the Court’s order on the motion to dismiss. He argues 21 that bankruptcy and RICO laws are in tension, and that by preventing Plaintiff from 22 reviewing Defendant’s pre-discharge conduct to establish a pattern of racketeering 23 activity, the Court did not provide RICO law sufficient deference. It appears, but is still 24 uncertain, that Plaintiff acknowledges that he is not able to base claims on pre-discharge 25 conduct, and only seeks to review pre-discharge conduct to show a pattern of 26 27 1 RICO refers to the Racketeer Influenced and Corrupt Organizations Act (“RICO”). 18 U.S.C. §§ 1961 et seq. 28 2 1 racketeering activity. 2 Defendant contends that the motion to dismiss was rightfully 2 decided, and Plaintiff has not met the heavy burden required for granting a motion for 3 reconsideration. 4 III. Discussion 5 A. 6 Eastern District Local Rule 230(j) requires that a party moving for reconsideration 7 show "what new or different facts or circumstances are claimed to exist which did not 8 exist or were not shown upon such prior motion, or what other grounds exist for the 9 motion, and why the fact or circumstances were not shown at the time of the prior 10 Legal Standard motion." E.D. Cal. L.R. 230(j). 11 To prevail on a motion for reconsideration, "a party must set forth facts or law of a 12 strongly convincing nature to induce the court to reverse its prior decision." Hansen v. 13 Schubert, 459 F.Supp.2d 973, 998 (E.D. Cal. 2006). "A motion for reconsideration 14 should not be granted, absent highly unusual circumstances, unless the district court is 15 presented with newly discovered evidence, committed clear error, or if there is an 16 intervening change in the controlling law," Marlyn Nutraceuticals, Inc. v. Mucos Pharma 17 GmbH & Co., 571 F.3d 873, 880 (9th Cir. 2009) (internal quotation marks and citations 18 omitted) "A party seeking reconsideration must show more than a disagreement with the 19 Court's decision, and recapitulation of the cases and argument considered by the court 20 before rendering its original decision fails to carry the moving party's burden." United 21 States v. Westlands Water Dist., 134 F.Supp.2d 1111, 1131 (E.D. Cal. 2006) (internal 22 citations omitted). 23 B. Analysis 24 Plaintiff has not presented any new law or evidence that indicate that the Court 25 committed clear error. While Plaintiff may disagree with the Court’s decision to prevent 26 27 28 2 Plaintiff still seeks to recover damages based on pre-discharge conduct: “Plaintiff does not abandon the argument that pre-discharge debts could overlap RICO injuries and be recoverable in a RICO claim, and does not waive any such damages.” (Mot. at 12, ECF No. 50.) 3 1 review of Defendant’s pre-discharge conduct, the decision was purposeful on the part of 2 the Court. 11 U.S.C. § 524(a) provides that bankruptcy discharge acts as an injunction to 3 broadly prevent not just legal proceedings, but any other acts to collect discharged debts 4 including “all forms of collection activity.” 4-524 Collier on Bankruptcy § 524.02. Plaintiff’s 5 attempt to conduct discovery and base his RICO claim on pre-discharge activity is in 6 direct violation of the principles of bankruptcy intending to provide the debtor an 7 unencumbered fresh start. Kokoszka v. Belford, 417 U.S. 642, 647 (1974); Walls v. 8 Wells Fargo Bank, N.A., 276 F.3d 502, 509 (9th Cir. 2002). 9 Unlike Plaintiff, the Court sees no inherent tension between bankruptcy and RICO 10 laws. It is clear that the government may reach back and review pre-discharge conduct 11 in a criminal RICO prosecution. However, as explained in the order on the motion to 12 dismiss, Plaintiff’s civil claim under RICO was not excepted from discharge, nor did 13 Plaintiff seek to revoke the discharge within the relevant period. The discharge therefore 14 remains in effect with regard to the debt in question, even if procured by fraud. Allowing 15 a claim, based in part on Defendant’s pre-discharge conduct, would undermine the 16 purpose of bankruptcy protections. 17 Plaintiff, in his motion for reconsideration, presents essentially the same 18 arguments set forth in the motion to dismiss. The only additional case mentioned by 19 Plaintiff, Cadle Co. v. Flanagan, 271 F. Supp. 2d 379 (D. Conn. 2003), does not 20 persuade the Court that its reasoning was incorrect, let alone clearly erroneous. In 21 Cadle, the court allowed a civil RICO claim to proceed based on bankruptcy fraud. 22 However, in Cadle, the defendant debtor had yet to obtain discharge. Therefore there is 23 no evidence that the Court allowed such claim despite a bankruptcy discharge order. 24 Having allowed Defendant to obtain a discharge, and failing to challenge the propriety of 25 the discharge, Plaintiff is in a fundamentally different position than the plaintiffs in Cadle. 26 The Court’s order that “Plaintiff may not pursue any claims for damages against 27 Defendant arising from pre-discharge conduct” stands. This ruling does not determine 28 whether evidence of pre-discharge activities may or may not be introduced to establish a 4 1 pattern of racketeering activity; that issue is not before the Court at this time. However, 2 in no event will Plaintiff be permitted to seek to recover damages from those pre- 3 discharge activities. In this regard, it is noted, as it was in the order on the motion to 4 dismiss, that the factual basis for Plaintiff’s RICO claim focused almost exclusively on 5 Defendant’s actions in connection with the real estate investment partnership and 6 bankruptcy proceedings. The only alleged criminal act occurring post-discharge was tax 7 fraud. (See, e.g., ECF No. 42 at ¶ 113.) Those claims of tax fraud previously were found 8 to lack particularity, and the Court granted Defendant’s motion for a more definite 9 statement. 10 With regard to attempts to produce evidence of a pattern of racketeering activity, 11 the Supreme Court has held that a plaintiff “must show that the racketeering predicates 12 are related, and that they amount to or pose a threat of continued criminal activity.” H.J., 13 Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 239 (1989). Thus, if Plaintiff is 14 permitted to proceed on such claims, he will be required to plead and show the relation 15 of pre-discharge activity to defendant’s alleged post-discharge tax fraud, that is, how the 16 past predicates posed a continued threat. Plaintiff also “must demonstrate that the 17 racketeering activity proximately caused the loss.” Guerrero v. Gates, 442 F.3d 697, 707 18 (9th Cir. 2006) (citing Chaset v. Fleer/Skybox Int’l, 300 F.3d 1083, 1087 (9th Cir. 2002)). 19 Thus, in addition to providing further factual detail to support such a claim if he wishes to 20 proceed with it, Plaintiff must show how Defendant’s alleged tax fraud or other post- 21 discharge criminal acts caused Plaintiff injury. 22 In conclusion, the argument presented in the motion simply restates the argument 23 presented in the underlying motion, and does not show that the Court committed clear 24 error. See Marlyn Nutraceuticals, Inc., 571 F.3d at 880. Accordingly, Plaintiff’s motion for 25 reconsideration is denied. To the extent that Plaintiff desires further review he may seek 26 interlocutory appeal. 28 U.S.C. 1292(b). And to the extent that Defendant considers 27 Plaintiff’s actions in this case to be in violation of the injunction created by the discharge 28 order, he can move the bankruptcy court for an order of contempt to enforce the 5 1 discharge order. See Barrientos v. Wells Fargo Bank, N.A., 633 F.3d 1186 (9th Cir. 2 2011); 4-524 Collier on Bankruptcy § 524.02(2)(c). 3 Finally, Plaintiff contends that his due process rights were violated by the failure of 4 the Court to hold oral argument on the motion or allow Plaintiff further briefing to address 5 the arguments and legal authority presented in the order. The Federal Rules of Civil 6 Procedure and the Local Rules for the Eastern District of California do not require 7 litigants to have the opportunity to orally present argument. Fed. R. Civ. P. 78(b) (“By 8 rule or order, the court may provide for submitting and determining motions on briefs, 9 without oral hearing.”); Local Rule 230(g). The Court determined that oral argument 10 would not have been helpful in determining the merits of motion to dismiss, nor does it 11 find oral argument necessary to determine this motion for reconsideration. Had the Court 12 decided the case on completely different grounds than presented in the briefs, further 13 briefing or argument might be appropriate. Here, the Court only cited to legal authority 14 and case law directly relevant to the arguments presented in the parties’ briefs. The 15 parties were provided sufficient opportunity to argue the merits of their positions in their 16 briefs. The fact that the parties did not raise relevant legal authority in their briefs does 17 not obligate the Court to provide the parties additional opportunity to present argument. 18 Moreover, Plaintiff, in presenting his new arguments in his motion for consideration, only 19 confirms that the Court would not have benefited from oral argument or further briefing. 20 IV. 21 22 Conclusion For the reasons discussed herein, Plaintiff’s Motion for Reconsideration is DENIED. Plaintiff’s amended complaint is due on or before January 27, 2017. 23 24 25 26 IT IS SO ORDERED. Dated: November 16, 2016 /s/ Michael J. Seng UNITED STATES MAGISTRATE JUDGE 27 28 6
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