JW Gaming Development, LLC v. James et al, No. 3:2018cv02669 - Document 55 (N.D. Cal. 2018)
Court Description: ORDER DENYING DEFENDANTS' 6 MOTION TO DISMISS AND DENYING DEFENDANTS' 23 MOTION TO STRIKE by Judge William H. Orrick. Defendants shall answer within 20 days. (jmdS, COURT STAFF) (Filed on 10/5/2018)
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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 JW GAMING DEVELOPMENT, LLC, Plaintiff, 8 9 10 United States District Court Northern District of California 11 Case No. 3:18-cv-02669-WHO v. ANGELA JAMES, et al., Defendants. ORDER DENYING DEFENDANTS' MOTION TO DISMISS AND DENYING DEFENDANTS' MOTION TO STRIKE Re: Dkt. Nos. 6, 7, 15, 23 12 13 14 INTRODUCTION From 2008 to 2011, Plaintiff JW Gaming, LLC (“JW Gaming”) invested $5,380,000 in the 15 Pinoleville Pomo Nation’s casino project, believing that it was matching an investment in the 16 same amount from the Canales Group, LLC (“the Canales Group”). JW Gaming now alleges that 17 leaders and members of both Pinoleville Pomo Nation (“the Tribe”) and the Canales Group were 18 part of a years-long scheme to fraudulently induce its investment and to conceal that fraud. It 19 brings suit alleging breach of contract, fraud, and violation of the Racketeer Influenced and 20 Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961–68. 21 Before me is a motion to dismiss brought by the Tribal Defendants (Angela James, Leona 22 Williams, Lenora Steele, Kathy Stallworth, Michelle Campbell, Julia Maldonado, Donald 23 Williams, Veronica Timberlake, Cassandra Steele, Jason Edward Running Bear Steele, and 24 Andrew Stevenson) and joined the Canales Defendants (Michael Canales, Melissa Canales, Kelly 25 Canales, Lori Canales, and the Canales Group) and John Tang. In addition, the Tribal Entity 26 Defendants (the Pinoleville Gaming Commission, the Pinoleville Business Board, and Pinoleville 27 Economic Development, LLC) move to dismiss the contract claim. Because the Tribal 28 Defendants are not entitled to sovereign immunity and the other claims are properly pleaded, I 1 deny the motions. BACKGROUND 2 JW Gaming brings this suit against the Tribe,1 four tribal entities, eleven tribal leaders and United States District Court Northern District of California 3 4 members, the Canales Group, and five Canales Group leaders and members. See Compl. [Dkt. 5 No. 1-1] ¶¶ 8–93. It asserts a breach of contract claim against the Tribe and Tribal Entity 6 Defendants and alleges that the remaining defendants engaged in a scheme to fraudulently solicit a 7 $5,380,000.00 investment in the Pinoleville Casino Project (“the Casino Project”). Id. ¶ 104. In 8 emails from July 2008 to January 2009, Michael Canales and John Tang (also of the Canales 9 Group) made repeated references to the $5 million investment that the Canales Group had made in 10 the Casino Project, and James Winner (who would later form JW Gaming), agreed to “match” that 11 investment. Id. ¶¶ 107–18. In an attachment to a January 30, 2009 email, John Tang provided JW 12 Gaming with a copy of a promissory note (“the 2008 Canales Note”) as proof of the Group’s 13 investment. Id. ¶¶ 118–20. Leona Williams, the chairperson of the tribal council and one of the 14 Tribal Defendants, had signed the note, and Michael and Melissa Canales were included on the 15 email. Id. ¶¶ 35, 121. From August 2008 to April 2011, JW Gaming made a total of $5,380,000.00 in payments 16 17 to the Tribe, the Canales Group, and John Tang. Id. ¶¶ 115–17, 163–64. Tribal Defendants 18 Angela James and Leona Williams were the authorized signers on two banks where JW Gaming 19 made $5 million in deposits. Id. ¶¶ 167–74. JW Gaming later learned that the Canales Group had never made any investments in the 20 21 Casino Project.2 Id. ¶ 123. It alleges that the defendants used its payments for personal purposes, 22 including, for example, a $95,000 transfer to a romantic partner, a $400,000 transfer to an 23 organization over which two defendants have ownership interests, and a $1 million transfer to 24 other defendants. See id. ¶¶ 16–23, 170, 174, 526, 555, Ex. 17. In early 2011, JW Gaming requested that the Tribe provide an accounting of its use of the 25 26 27 28 1 2 The Tribe is federally recognized and headquartered in California. Compl. ¶ 8. JW Gaming learned this information from Forster-Gill, Inc., which previously sued some of the defendants in this case. See Oppo. to Mot. to Dismiss 13. 2 United States District Court Northern District of California 1 company’s investment. Id. ¶ 176. An accounting firm prepared the report (“the Accounting 2 Report”), which was addressed to Leona Williams, and emailed it to her and Michael Canales in 3 November 2011. Id. ¶¶ 179–82. Melissa Canales sent it to JW Gaming two days later. Id. ¶¶ 4 176–79. Subsequently, JW Gaming exchanged several emails about the Accounting Report with 5 Michael Canales and Melissa Canales, some of which made reference to or were copied to Leona 6 Williams. See id. ¶¶ 189–205. 7 From December 2011 to April 2012, JW Gaming, tribal leadership, and the Canales Group 8 engaged in negotiations, mostly via email, regarding the future of the Casino Project. Id. ¶¶ 206– 9 36. In a promissory note dated July 10, 2012 (“the Note”), “The Tribe and/or the Gaming 10 Authority” promised to repay JW Gaming its $5,380,000.00 investment plus interest. Id. ¶ 239, 11 Ex. 26 [Dkt. No. 1-4] 1. Tribal Defendants Leona Williams and Angela James signed the note, 12 which included a limited waiver of sovereign immunity. Id. ¶¶ 240, 255, Ex. 26 3. The Tribal 13 Defendants and the Canales Group represented that they were entering into a separate note (“the 14 2012 Canales note”) regarding the Canales investment. Id. ¶¶ 368–74. After learning about the alleged fraud, JW Gaming brought suit in Mendocino County 15 16 Superior Court on March 1, 2018. Defendants removed it to federal court on May 7, 2018. Notice 17 of Removal [Dkt. No. 1]. Before me is a motion to dismiss3 brought by the Tribal Defendants and 18 the Tribal Entity Defendants and joined by the Canales Defendants and John Tang. LEGAL STANDARD 19 20 I. RULE 12(b)(1) MOTION TO DISMISS A motion to dismiss under Rule 12(b)(1) of the Federal Rules of Civil Procedure is a 21 22 challenge to the court’s subject matter jurisdiction. See FED. R. CIV. P. 12(b)(1). “Federal courts 23 are courts of limited jurisdiction,” and it is “presumed that a cause lies outside this limited 24 25 26 27 28 3 The Tribal Defendants also moved to strike the Declaration of Tim Gill, which JW Gaming provided in opposition, on the grounds that it is responsive only to their 12(b)(6) motions, under which it is improper to consider evidence beyond the pleadings. Mot. to Strike [Dkt. No. 23]. Motions to strike are generally viewed with disfavor. If the evidence provided is moderately relevant, it can be included. I find this declaration relevant to challenge the Tribal Defendants’ 12(b)(1) argument that this matter is merely an intra-tribal dispute, specifically the allegation that JW Gaming is a “proxy.” See Mot. to Dismiss 16. The motion to strike is DENIED. 3 1 jurisdiction.” Kokkonen v. Guardian Life Ins. of Am., 511 U.S. 375, 377 (1994). The party 2 invoking the jurisdiction of the federal court bears the burden of establishing that the court has the 3 authority to grant the relief requested. Id. United States District Court Northern District of California 4 A challenge pursuant to Rule 12(b)(1) may be facial or factual. See White v. Lee, 227 F.3d 5 1214, 1242 (9th Cir. 2000). In a facial attack, the jurisdictional challenge is confined to the 6 allegations pled in the complaint. See Wolfe v. Strankman, 392 F.3d 358, 362 (9th Cir. 2004). 7 The challenger asserts that the allegations in the complaint are insufficient “on their face” to 8 invoke federal jurisdiction. See Safe Air Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th 9 Cir. 2004). To resolve this challenge, the court assumes that the allegations in the complaint are 10 true and draws all reasonable inference in favor of the party opposing dismissal. See Wolfe, 392 11 F.3d at 362. 12 II. RULE 12(b)(6) MOTION TO DISMISS 13 Under Federal Rule of Civil Procedure 12(b)(6), a district court must dismiss a complaint 14 if it fails to state a claim upon which relief can be granted. FED. R. CIV. P. 12(b)(6). To survive a 15 12(b)(6) motion, the plaintiff must allege “enough facts to state a claim to relief that is plausible 16 on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007). A claim is facially plausible 17 when the plaintiff pleads facts that “allow the court to draw the reasonable inference that the 18 defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) 19 (citation omitted). There must be “more than a sheer possibility that a defendant has acted 20 unlawfully.” Id. While courts do not require “heightened fact pleading of specifics,” a plaintiff 21 must allege facts sufficient to “raise a right to relief above the speculative level.” Twombly, 550 22 U.S. at 555, 570. 23 In deciding whether the plaintiff has stated a claim upon which relief can be granted, the 24 court accepts the plaintiff’s allegations as true and draws all reasonable inferences in favor of the 25 plaintiff. Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987). However, the court is 26 not required to accept as true “allegations that are merely conclusory, unwarranted deductions of 27 fact, or unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 28 2008). If the court dismisses the complaint, it “should grant leave to amend even if no request to 4 1 amend the pleading was made, unless it determines that the pleading could not possibly be cured 2 by the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000). DISCUSSION 3 4 5 The Tribal Defendants move to dismiss the fraud and RICO claims on sovereign immunity 6 grounds and the fraud and RICO claims on intra-tribal dispute grounds. The Tribal Defendants, 7 the Canales Defendants, and John Tang move to dismiss the RICO claims on standing grounds. 8 A. Tribal Defendants Not Entitled to Sovereign Immunity 9 United States District Court Northern District of California I. RULE 12(b)(1) MOTIONS As sovereigns, Indian Tribes are generally immune from suit. Lewis v. Clarke, 137 S. Ct. 10 1285, 1288 (2017). Tribal officers sued in an official capacity share that immunity, but it does not 11 always extend to tribal employees sued in their individual capacities. See id. Even when a tribal 12 employee is sued for actions taken within the scope of her employment, a personal suit can 13 proceed unless the court determines that “the sovereign is the real party in interest.” Id. at 1290– 14 91. Sovereign immunity bars individual-capacity suits when “the remedy sought is truly against 15 the sovereign.” Id. at 1290. 16 The Tribal Defendants argue that JW Gaming’s suit primarily focuses on contractual 17 recovery for alleged breach of the Note. Mot. to Dismiss 10. Because the Tribe, not its 18 representatives, was party to the contract, it is the real party in interest. See id. JW Gaming 19 counters that it is suing the tribal employees in their individual capacities for their own fraudulent 20 conduct and that it asserts no claims of vicarious liability. Oppo. to Mot. to Dismiss 10. 21 The Supreme Court allowed a personal-capacity suit against a tribal employee who was 22 acting within the scope of his employment because a judgment would not “operate against the 23 [t]ribe” but was “simply a suit against [the employee] to recover for his personal actions.” Lewis, 24 137 S. Ct. at 1291. The Court rejected the tribe’s argument that the indemnification clause in the 25 employment contract should permit the application of sovereign immunity. Id. at 1192. Instead, 26 “[t]he critical inquiry [was] who may be legally bound by the court’s adverse judgment, not who 27 [would] ultimately pick up the tab.” Id. at 1192–93. 28 Applying Lewis to the facts alleged here, I conclude that this suit is against the Tribal 5 1 Defendants in their individual capacities and that the Tribe is not the real party in interest. JW 2 Gaming alleges that the individuals themselves engaged in fraud and that it suffered damages as a 3 result. Oppo. to Mot. to Dismiss 10. In the event of an adverse judgment, the individual 4 defendants—not the Tribe—will be bound. See Lewis, 137 S. Ct. at 1192–93. 5 B. JW Gaming Has Standing United States District Court Northern District of California 6 The Tribal Defendants, the Canales Defendants, and John Tang argue that JW Gaming 7 lacks standing to pursue its RICO claims because it cannot show that their activities proximately 8 caused their injuries. Mot. to Dismiss 12. The alleged injury resulted from breach of the Note 9 rather than the alleged wire fraud or money laundering. Mot. to Dismiss 13–14. 10 To establish standing to sue under RICO, a party must show proximate cause: “some 11 direct relation between the injury asserted and the injurious conduct alleged.” Holmes v. Sec. Inv’r 12 Prot. Corp., 503 U.S. 258, 268 (1992). This requirement helps to “limit a person’s responsibility 13 for the consequences of that person’s own acts.” Id. 14 In Anza, the Supreme Court held that a plaintiff failed to show proximate cause when the 15 direct victim of the alleged racketeering was the state, not the plaintiff. Anza v. Ideal Steel Supply 16 Corp., 547 U.S. 451, 458 (2006). The plaintiff alleged that the defendants defrauded the state tax 17 authority and then used those saved funds to decrease their prices, thus causing the plaintiff’s sales 18 losses. Id. The Court noted that the asserted harms were caused by “a set of actions (offering 19 lower prices) entirely distinct from the alleged RICO violation (defrauding the State).” Id. The 20 court identified a “second discontinuity” because both the lower prices and the lost sales could 21 have had other, independent causes. Id. at 459. 22 In Platten, the First Circuit held that plaintiffs failed to show proximate cause because they 23 did not allege reliance on the defendant’s misrepresentations. Platten v. HG Bermuda Exempted 24 Ltd., 437 F.3d 118, 132 (1st Cir. 2006). In that case, plaintiffs had entered into an employment 25 agreement to become part of a consulting partnership. Id. at 123–24. Upon leaving the 26 partnership and joining other consulting groups, they were denied their full partnership shares. Id. 27 at 124–25. They alleged that the defendant had misrepresented its interpretation of the non- 28 competition clause as part of a scheme to withhold distributions. Id. at 125. But because plaintiffs 6 1 had not alleged that they relied on defendants’ statements—instead they had signed the 2 agreements as a condition of employment—defendants’ fraud could not have caused their injuries. 3 Id. at 132. Here, JW Gaming properly alleged proximate cause between its injury and the racketeering United States District Court Northern District of California 4 5 activity. Defendants’ attenuation arguments are unpersuasive. They assert that the Tribe’s failure 6 to repay the Note, not prior fraudulent activities, caused the alleged injury. But unlike Patten, 7 where plaintiffs would have signed the employment agreement anyway, here there is evidence that 8 the defendants’ misrepresentations directly contributed to JW Gaming’s decision to invest in the 9 Casino Project. Throughout early negotiations, there were repeated references to the Canales 10 Group investment, which creates the necessary direct relationship. Only years later did the Tribe 11 and JW Gaming enter into the Note, after fraudulent misrepresentations, investment, and 12 misappropriation of funds had already occurred. I find that JW Gaming properly alleges proximate cause and thus has standing to sue under 13 14 RICO. 15 C. The Intra-Tribal Dispute Doctrine Does Not Apply 16 17 The Tribal Defendants argue that the court lacks subject matter over this action because it was brought as a proxy for an internal tribal dispute over the leadership’s decisions. 18 Indian tribes have the power to write and enforce their own laws governing internal 19 matters. Santa Clara Pueblo v. Martinez, 436 U.S. 49, 55 (1978). Out of respect for tribal 20 sovereignty, federal courts lack subject matter jurisdiction over disputes that are properly resolved 21 in the internal forum, including, for example, membership and adoption. See id. at 71; Fisher v. 22 Dist. Court of Sixteenth Judicial Dist. of Montana, in & for Rosebud Cty., 424 U.S. 382, 383, 387– 23 88 (1976). This doctrine prevents the federal government from taking actions that would “unsettle 24 a tribal government’s ability to maintain authority.” Santa Clara, 436 U.S. at 60. It applies to 25 cases that “present a genuine and non-frivolous question of tribal law,” and not when there is a 26 “mere suggestion” of such a dispute. Miccosukee Tribe of Indians of Fla. v. Cypress, 814 F.3d 27 1202, 1209 (11th Cir. 2015). 28 The Tribal Defendants argue that this dispute lies not with JW Gaming but with 7 United States District Court Northern District of California 1 disgruntled members of the Tribe. Mot. to Dismiss 16. They allege that JW Gaming “serves as a 2 proxy for this fight,” which is really a “disagreement with the tribal leadership’s exercise of their 3 power,” as evidenced by the complaint’s request for appointment of a receiver. Id. 4 I find that there is subject matter jurisdiction over this action because a judgment by this court 5 would not interfere with the Tribe’s ability to self-govern. It is more than merely a dispute 6 between members about internal affairs because it involves plausible allegations of fraud 7 perpetrated against a non-tribal entity. Neither the fact that Tribe members are involved nor the 8 unsupported allegations about JW Gaming’s motivation for filing suit brings this action under the 9 intra-tribal dispute doctrine. The Tribal Defendants’ concerns over the appointment of a receiver 10 are properly addressed much later in the litigation. 11 II. RULE 12(b)(6) MOTIONS 12 The Tribal Defendants, the Canales Defendants, and John Tang move to dismiss the fraud 13 claims on the grounds that they lack the required particularity and the RICO claims on the grounds 14 that JW Gaming did not sufficiently plead the required elements. 15 A. Fraud Pleaded with Particularity 16 The defendants argue that JW Gaming’s fraud pleadings lack particularity because they do 17 not allege when, how much, and at whose direction the loans were converted to personal use. 18 Mot. to Dismiss 17. JW Gaming counters by pointing to two promissory notes, falsified 19 accounting with amounts, emails with falsified documents attached, and testimony from another 20 suit that affirms their falsity. Oppo. to Mot. to Dismiss 15. 21 Rule 9(b) of the Federal Rules of Civil Procedure requires plaintiffs to plead fraud with 22 particularity. FED. R. CIV. P. 9(b). The complaint must identify “the circumstances constituting 23 fraud so that the defendant can prepare an adequate answer from the allegations.” Bosse v. 24 Crowell Collier & MacMillan, 565 F.2d 393, 397 (9th Cir. 1973). The information should include 25 “the time, place, and specific content of the false representations as well as the identities of the 26 parties to the misrepresentation.” Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 27 1393, 1401 (9th Cir. 1986). While allegations of specific falsities by each defendant are not 28 necessary, the plaintiff must identify each one’s role in the scheme. Swartz v. KPMG LLP, 476 8 1 United States District Court Northern District of California 2 F.3d 756, 764–65 (9th Cir. 2007). I find that JW Gaming pleaded fraud with the particularity Rule 9(b) requires, including 3 naming the roles particular individuals played. It states the identities of the defendants who were 4 involved in early negotiations and who created and presented it with an allegedly fraudulent 5 promissory note in January 2009. Compl. ¶¶ 305, 307, 311, 490, 494. It states the identities of the 6 defendants who created and presented them with the allegedly falsified Accounting Report in 7 November 2011, including names of individuals who were part of email communications. Id. ¶¶ 8 328–29, 334. It provides a detailed breakdown of the amounts stated in the Accounting Report 9 and compares them to amounts provided during Forster-Gill’s litigation with defendants. Id. ¶¶ 10 341–48. Throughout the complaint, JW Gaming names specific roles that each defendant played 11 in the alleged scheme. 12 Contrary to defendants’ argument, JW Gaming also specifically identifies their conversion 13 of loan money to personal use. It alleges that two defendants were the only names on bank 14 accounts where loan checks were deposited, that some checks went directly to individual 15 defendants, that one defendant’s partner received $95,000 of the loan proceeds, that $400,000 16 went to an organization over which two have ownership interests, and that $1 million was paid to 17 other individuals. See id.; Compl. ¶¶ 16–23, 116–17, 170, 174, 555, Ex. 17. 18 B. Elements of RICO Sufficiently Pleaded 19 The defendants argue that JW Gaming’s complaint does not state a plausible claim for 20 relief under the RICO statute. Mot. to Dismiss 19. The elements of a RICO claim are: (i) the 21 conduct of (ii) an enterprise that affects interstate commerce (iii) through a pattern (iv) of 22 racketeering activity or collection of unlawful debt. 18 U.S.C. § 1962(c); Eclectic Props. E., LLC 23 v. Marcus & Millichap Co., 751 F.3d 990, 997 (9th Cir. 2014). 24 i. Predicate Acts 25 The defendants argue that JW Gaming has not sufficiently alleged predicate acts 26 supporting its RICO claim. Mot. to Dismiss 21. JW Gaming concedes that its complaint does not 27 properly plead bank fraud because none of the allegedly false statements were communicated to 28 financial institutions. See Oppo. to Mot. to Dismiss 18 n. 14; Loughrin v. United States, 134 S. Ct. 9 1 2 a. Wire Fraud 3 Wire fraud includes “any scheme to deprive another of money or property by means of 4 false or fraudulent pretenses, representations, or promises.” Carpenter v. United States, 484 U.S. 5 19, 27 (1987). Claims under 18 U.S.C. section 1343 require three elements: (i) the formation of a 6 scheme to defraud; (ii) the use of the mails or wires in furtherance of that scheme; and (iii) the 7 specific intent to defraud. Eclectic Props. E., LLC v. Marcus & Millichap Co., 751 F.3d 990, 997 8 (9th Cir. 2014). A plaintiff satisfies the specific intent requirement by pleading the alleged 9 scheme in detail. Best Deals on TV, Inc. v. Naveed, No. C 07-1610 SBA, 2007 WL 2825652, at 10 11 United States District Court Northern District of California 2384, 2394 (2014). I find that JW Gaming properly pleads wire fraud and money laundering. *10 (N.D. Cal. Sept. 26, 2007). JW Gaming states a claim for wire fraud. It asserts with great detail that defendants were 12 part of a coordinated scheme to induce it to invest $5,380,000 in the Casino Project. The 13 complaint provides dates, excerpts from email correspondence, and amounts of transactions. JW 14 Gaming alleges that the misrepresentations began at the beginning and continued until the end of 15 its dealings with the defendants. The detailed scheme it lays out is enough to clear the specific 16 intent hurdle at the pleading stage. 17 b. Money Laundering 18 Claims of money laundering under 18 U.S.C. section 1957 require four elements: (i) the 19 defendant knowingly engaged in a monetary transaction; (ii) he knew the transaction involved 20 criminal property; (iii) the property’s value exceeded $10,000; and (iv) the property was derived 21 from a specified unlawful activity. United States v. Rogers, 321 F.3d 1226, 1229 (9th Cir. 2003). 22 The defendants challenge this predicate act only on the basis that JW Gaming did not plead 23 a “specific unlawful activity.” As a court in this district held, misappropriated funds from a 24 business can be considered “proceeds of some form of unlawful activity” even if the business 25 itself was not engaged in unlawful activity. Best Deals, 2007 WL 2825652, at *8. Here, JW 26 Gaming alleges that defendants misappropriated funds meant for the Casino Project and used them 27 for individual purposes. It states a claim for money laundering. 28 10 1 ii. Pattern 2 A pattern is more than “two isolated acts of racketeering activity.” Sedima, S.P.R.L. v. 3 Imrex Co., 473 U.S. 479, 496 n. 14 (1985). Instead, the events must have overlapping goals, 4 outcomes, people, or methods and show a “threat of continuing activity.” Id. at 496 n. 14, 528. 5 A pattern does not require multiple schemes, and so, “if a defendant commits two or more 6 predicate acts that are not isolated events, are separate in time, and are in furtherance of a single 7 criminal scheme, then RICO’s pattern requirement is satisfied.” Sun Sav. & Loan Ass'n v. 8 Dierdorff, 825 F.2d 187, 193 (9th Cir. 1987). United States District Court Northern District of California 9 JW Gaming’s complaint alleges facts that show a pattern. It alleges two or more predicate 10 acts as detailed above. The events are not isolated but share common actors (the defendants), a 11 common victim (JW Gaming), and a common purpose (to defraud JW Gaming and to conceal that 12 fraud). The events are separate in time, occurring between 2008 and 2012. As alleged, fraud 13 imbued the earliest interactions between JW Gaming and the defendants and continued for years. 14 Contrary to the defendants’ arguments, JW Gaming need not show more than one scheme to show 15 a pattern. See Mot. to Dismiss 20–21; Sun Sav. & Loan Ass'n v. Dierdorff, 825 F.2d 187, 193 (9th 16 Cir. 1987). 17 C. The Tribal Entity Defendants Are Proper Parties to the Contract Claim 18 The Tribal Entities argue that the contract claim against them should be dismissed because 19 only the Tribe is a party to the 2012 Note. JW Gaming counters by noting that the Gaming 20 Authority is expressly included as a party to the contract and is bound by its terms. In addition, 21 the Note defines the Gaming Authority with reference to its “successors and assigns,” which JW 22 Gaming argues includes the Gaming Commission, the Business Board, and the Pinoleville 23 Economic Development Commission. Defendants did not counter this assertion in their reply. 24 JW Gaming states a claim as to the Tribal Entity Defendants. 25 III. INTERLOCUTORY APPEAL 26 JW Gaming asks me to certify as frivolous the Tribal Defendants’ likely appeal of my 27 denial of the tribal sovereign immunity defense. Supp. Brief [Dkt. No. 53] 1. The Tribal 28 Defendants oppose. Response [Dkt. No. 54] 3, 8. 11 When a district court denies “a substantial claim of absolute immunity,” that order is 1 2 appealable before final judgment. Mitchell v. Forsyth, 472 U.S. 511, 525 (1985). Such an appeal 3 automatically divests the court of jurisdiction pending its resolution. Chuman v. Wright, 960 F.2d 4 104, 105 (9th Cir. 1992). If a district court certifies that an appeal would be frivolous or has been 5 waived, it can maintain jurisdiction and proceed to trial. Id. “‘An appeal is frivolous if the results 6 are obvious, or the arguments of error are wholly without merit.’” Todd v. LaMarque, No. C 03- 7 3995-SBA, 2008 WL 205591, at *2 (N.D. Cal. Jan. 24, 2008) (quoting In re George, 322 F.3d 8 586, 591 (9th Cir. 2003)). JW Gaming acknowledges that no district court has certified as frivolous an appeal based United States District Court Northern District of California 9 10 on tribal sovereign immunity. Supp. Brief 4 n. 4. It nonetheless asks that I apply Chuman here 11 because rather than acting for the benefit of the Tribe, the individual defendants committed fraud 12 that in fact hurt the Tribe. Id. at 9. As such, there is no way to view the Tribe as the real party in 13 interest. Id. at 6. I cannot agree. Although JW Gaming sues the defendants in their individual capacities, 14 15 they were acting in their roles as members and leaders of the Tribe during the course of their 16 allegedly fraudulent dealings with JW Gaming. This case is not so clear-cut that an appeal would 17 be frivolous. I decline JW Gaming’s request to certify it as such.4 18 IV. DISCOVERY JW Gaming asked that I address discovery in this order. As noted above, this court will be 19 20 divested of jurisdiction in the event that the Tribal Defendants file an appeal of this denial of the 21 sovereign immunity defense. I will address a schedule for discovery at the Case Management 22 Conference on November 13, 2018. 23 CONCLUSION 24 For the foregoing reasons, the motions to dismiss are DENIED and defendants shall 25 26 27 28 4 Because I decline to certify the appeal as frivolous, there is no need to address the Tribal Defendants’ argument that the plaintiff’s request is premature and must await actual filing of the appeal. Response 3–4; see Kendrick v. Cty. of San Diego, No. 15CV2615, 2018 WL 3361354, at *1 (S.D. Cal. July 10, 2018) (addressing a request for Chuman certification made after the appeal had been filed). 12 1 2 3 answer within twenty days of the date of this Order. The motion to strike is also DENIED. IT IS SO ORDERED. Dated: October 5, 2018 4 5 William H. Orrick United States District Judge 6 7 8 9 10 United States District Court Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 13
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