Mula v. Mula-Stouky et al, No. 5:2021cv04540 - Document 127 (N.D. Cal. 2022)
Court Description: ORDER GRANTING 59 DEFENDANT KRISTOFER BIORN'S MOTION TO DISMISS THE FIRST AMENDED COMPLAINT WITH LEAVE TO AMEND. Signed by Judge Beth Labson Freeman on 4/21/2022. (blflc1, COURT STAFF) (Filed on 4/21/2022)
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1 2 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 SAN JOSE DIVISION 6 7 PAUL MULA, JR., Plaintiff, 8 v. 9 10 HELENE MULA-STOUKY, et al., Defendants. United States District Court Northern District of California 11 Case No. 21-cv-04540-BLF ORDER GRANTING DEFENDANT KRISTOFER BIORN’S MOTION TO DISMISS THE FIRST AMENDED COMPLAINT WITH LEAVE TO AMEND [Re: ECF 59] 12 Plaintiff Paul Mula, Jr. (“Paul Jr.”) sues members of his family, court-appointed 13 14 conservators and attorneys, and others, claiming that they have engaged in a RICO1 conspiracy to 15 deprive him of assets of his deceased grandmother’s trust that were intended for him. This order 16 addresses a motion to dismiss the first amended complaint (“FAC”) brought by Defendant 17 Kristofer Biorn, an attorney retained by Paul Jr. in 2012, pursuant to Federal Rule of Civil 18 Procedure 12(b)(6). The motion is GRANTED WITH LEAVE TO AMEND. I. 19 BACKGROUND Paul Jr. filed this action on June 11, 2021, and thereafter filed the operative FAC as of 20 21 right. See Compl., ECF 1; FAC, ECF 53. He alleges the following facts, which are accepted as 22 true for purposes of evaluating the motion to dismiss. 23 The Ogier Trust 24 Paul Jr.’s grandmother, Sara Mula-Ogier (“Sarah”), accumulated millions of dollars in 25 assets during her lifetime, including real estate, stocks, bonds, cash, and personal property. FAC ¶ 26 10. Sarah had three children: Alan Mula (“Alan”), Helene Mula-Stouky (“Helene”), and Paul 27 28 1 Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §1961 et seq. United States District Court Northern District of California 1 Mula, Sr. (“Paul Sr.). Id. ¶ 11. Neither Alan nor Helene had children, but Paul Sr. fathered Paul 2 Jr. and, much later, a daughter who is not a party to this action. Id. On August 17, 2000, Sarah 3 formed the Ogier Trust, naming Paul, Jr. as the beneficiary of the bulk of its assets. Id. ¶ 14. 4 Sarah named her daughter, Helene, as her successor Trustee. Id. ¶ 15. A sub-trust of the Ogier 5 Trust was to be established to support Helene for her lifetime, and upon Helene’s death the assets 6 of the sub-trust were to be distributed to Paul Jr. when he turned 50 years old. Id. 7 Transfer of Assets out of the Ogier Trust 8 In 2005, weeks before she died, Sarah signed quitclaim deeds to four real properties 9 previously held in the Ogier Trust. Id. ¶¶ 17-20. The beneficiaries of those quitclaim deeds were 10 Alan, Helene, and Paul Sr. Id. In 2006, Helene retained an attorney, Terry Campbell Wallace 11 (“Campbell), to petition the Probate Court for an order confirming the 2005 transfers. Id. ¶ 24. 12 Paul Jr. did not receive notice of the 2006 petition. Id. ¶ 24. The Probate Court granted the 13 petition and allowed transfer of the four real properties to Alan, Helene, and Paul Sr. Id. 14 Helene allowed her brothers, Alan and Paul Sr., to convert assets of the Ogier Trust. Id. ¶ 15 29. Helene also comingled assets of the Ogier Trust with her own Stouky Trust, such that Ogier 16 Trust assets were placed in the Stouky Trust. Id. ¶ 40. 17 Stouky Trust 18 In 2012, Helene was conserved. FAC ¶ 31. The Probate Court appointed Robert 19 Temmerman (“Temmerman”) as Helene’s attorney, and Paul Jr.’s half-sister, Christina Smith 20 Weiss (“Weiss”), as the Conservator of Helene’s person. Id. ¶ 31. The Probate Court appointed 21 Patricia Bye (“Bye”) as the Conservator of Helene’s estate and as the successor Trustee of the 22 Stouky Trust. Id. ¶ 32. 23 Paul Jr. was the principal beneficiary of the Stouky Trust. FAC ¶ 27. However, after 24 Helene was conserved, Temmerman and Bye obtained amendments to the Stouky Trust that 25 reduced Paul Jr.’s interest as a beneficiary of the Stouky Trust, and dissipated the assets of the 26 Stouky Trust, many of which were former assets of the Ogier Trust. Id. ¶¶ 35-53. Trust assets 27 valued at approximately $3,600,000 intended for Paul Jr. have been bequeathed and gifted to 28 Weiss. Id. ¶¶ 43-44. 2 United States District Court Northern District of California 1 Biorn’s 2012 Legal Services to Paul Jr. 2 In 2012, Paul Jr. sought legal advice. FAC ¶ 102. Temmerman referred Paul Jr. to Biorn, 3 and Paul Jr. retained Biorn for advice regarding the 2005 quitclaim deeds signed by Sarah. Id. ¶¶ 4 8.10, 102-103. Biorn advised that the statute of limitations had elapsed with respect to any claims 5 arising from the 2005 transfers. Id. ¶ 103. Biorn did not inform Paul Jr. that the 2005 transfers 6 were ineffective, and did not inform him about the 2006 probate proceedings. Id. 7 The Present Lawsuit 8 Paul Jr. sues the following individuals for RICO violations and related claims: Alan; 9 Helene; Temmerman; Temmerman’s law firm, Temmerman, Cilley & Kohlmann, LLP; Bye; 10 Bye’s employer, Bye & Bye Services; Bye’s attorney, Alexandra Martin (“Martin”); Martin’s law 11 firm, Aaron, Riechert, Carpol & Riffle, APC; Bye’s former attorney, Howard G. Frank (“Frank”); 12 Weiss; Campbell; Biorn; and Biorn’s law firm, Crist, Schulz, Biorn & Shepherd APC. 13 The FAC asserts the following claims: (1) a RICO claim against all defendants; (2) breach 14 of fiduciary duties against Bye as the Conservator of Helene’s estate; (3) breach of fiduciary duties 15 against Bye as Trustee of the Stouky Trust; (4) breach of fiduciary duties against Helene and Bye 16 as Trustees of the Ogier Trust; (5) aiding and abetting breach of fiduciary duties against all 17 defendants; (6) conspiracy to breach fiduciary duties against all defendants; (7) unjust enrichment 18 against Weiss; (8) intentional interference with expectancy of inheritance against Temmerman and 19 Bye; (9) unfair competition against Temmerman and Bye; (10) violation of the Fair Debt 20 Collection Practices Act against Bye and Martin; (11) legal malpractice against Biorn; and (12) 21 conversion against Alan, Helene, Bye, and Weiss. 22 23 II. LEGAL STANDARD “A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a 24 claim upon which relief can be granted tests the legal sufficiency of a claim.” Conservation Force 25 v. Salazar, 646 F.3d 1240, 1241-42 (9th Cir. 2011) (quotation marks and citation omitted). While 26 a complaint need not contain detailed factual allegations, it “must contain sufficient factual matter, 27 accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 28 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). 3 1 DISCUSSION 2 Four of the FAC’s twelve claims are asserted against Defendant Biorn: Claim 1 for 3 violations of RICO, Claim 5 for aiding and abetting breach of fiduciary duties, Claim 6 for 4 conspiracy to breach fiduciary duties, and Claim 11 for legal malpractice. Biorn seeks dismissal 5 of all claims under Rule 12(b)(6). Plaintiff Paul Jr. contends that his claims are adequately pled. 6 The Court agrees with Biorn that the FAC fails to state a claim against him, as discussed 7 below. The Court notes that although the Notice of Motion states expressly that the motion is 8 brought under Rule 12(b)(6), the supporting memorandum contains two passing references to Rule 9 12(b)(1). See Biorn Mot. at 7, 25, ECF 59-1. Because Biorn did not adequately notice or brief a 10 United States District Court Northern District of California III. motion to dismiss under Rule 12(b)(1), the Court considers only the Rule 12(b)(6) motion. Claim 1 – RICO 11 A. 12 “The RICO statute sets out four elements for a primary violation: a defendant must 13 participate in (1) the conduct of (2) an enterprise that affects interstate commerce (3) through a 14 pattern (4) of racketeering activity or collection of unlawful debt.” Eclectic Properties E., LLC v. 15 Marcus & Millichap Co., 751 F.3d 990, 997 (9th Cir. 2014). 16 Claim 1 alleges that all Defendants engaged in a pattern of wrongful conduct to allow them 17 to acquire and maintain control of the Ogier Trust and the Stouky Trust, and to plunder the assets 18 of those Trusts. FAC ¶¶ 73-78. However, the only conduct alleged as to Biorn relates to his 19 retention by Paul Jr. in 2012. FAC ¶¶ 8.10, 48, 102-105. Paul Jr. sought advice regarding the 20 2005 transfers, and Biorn allegedly advised that any claims arising out of those transfers were 21 time-barred. Id. ¶ 103. According to Paul Jr., that was not true, and “[b]ut for Biorn’s negligence 22 Paul, Jr, would have learned of the 2006 probate proceeding and instructed Biorn to move to set it 23 aside as a fraud on the court.” Id. ¶ 104. Paul Jr. does not allege any facts suggesting that Biorn’s 24 legal malpractice in 2012 was pursuant to or in furtherance of the alleged RICO conspiracy. 25 Biorn’s motion to dismiss is GRANTED as to Claim 1. 26 B. 27 “The elements of a claim for aiding and abetting a breach of fiduciary duty in California 28 Claim 5 – Aiding and Abetting Breach of Fiduciary Duties are: (1) a third party’s breach of fiduciary duties owed to plaintiff; (2) defendant’s actual 4 1 knowledge of that breach of fiduciary duties; (3) substantial assistance or encouragement by 2 defendant to the third party’s breach; and (4) defendant’s conduct was a substantial factor in 3 causing harm to plaintiff.” Gregory v. Harris, No. 21-CV-03311-VKD, 2022 WL 62539, at *5 4 (N.D. Cal. Jan. 6, 2022) (internal quotation marks and citation omitted). 5 6 Stouky Trusts, and alleging that Bye breached fiduciary duties she owed to Paul Jr. as a 7 beneficiary of those Trusts. FAC ¶¶ 86-87. The FAC does not allege that Biorn had actual 8 knowledge of Bye’s breach of fiduciary duties (second element), that Biorn rendered substantial 9 assistance or encouragement to Bye (third element), or that Biorn’s conduct was a substantial 10 United States District Court Northern District of California Claim 5 alleges only the first element, identifying Bye as the Trustee of the Ogier and factor in the harm Bye’s breach of fiduciary duties caused to Paul Jr. (fourth element). 11 Biorn’s motion to dismiss is GRANTED as to Claim 5. 12 C. 13 Under California law, “[t]he elements of a civil conspiracy are (1) the formation of a group Claim 6 – Conspiracy to Breach Fiduciary Duties 14 of two or more persons who agreed to a common plan or design to commit a tortious act; (2) a 15 wrongful act committed pursuant to the agreement; and (3) resulting damages.” City of Indus. v. 16 City of Fillmore, 198 Cal. App. 4th 191, 212 (2011). To be liable, a defendant must “have actual 17 knowledge that a tort is planned and concur in the tortious scheme with knowledge of its unlawful 18 purpose.” Kidron v. Movie Acquisition Corp., 40 Cal. App. 4th 1571, 1582 (1995). 19 Claim 6 alleges that “[a]ll of the Defendants knowingly participated in a common scheme 20 to assist Bye in her breach of the fiduciary duties she owed to Paul, Jr., as set forth above, with a 21 view to the furtherance of a common purpose or design.” FAC ¶ 91. However, the FAC does not 22 contain any facts supporting those conclusory allegations with respect to Biorn. The FAC does 23 not allege that Biorn had actual knowledge Bye planned to breach her fiduciary duties, nor does it 24 allege that Biorn concurred in that scheme with knowledge of its unlawful purpose. 25 Biorn’s motion to dismiss is GRANTED as to Claim 6. 26 D. 27 “In civil malpractice cases, the elements of a cause of action for professional negligence 28 Claim 11 – Legal Malpractice are: (1) the duty of the attorney to use such skill, prudence and diligence as members of the 5 1 profession commonly possess; (2) a breach of that duty; (3) a proximate causal connection 2 between the breach and the resulting injury; and (4) actual loss or damage.” Wiley v. Cty. of San 3 Diego, 19 Cal. 4th 532, 536 (1998) (internal quotation marks and citation omitted). United States District Court Northern District of California 4 The FAC alleges that Paul Jr. learned in 2012 of Sarah’s 2005 transfers of real properties 5 from the Ogier Trust. FAC ¶ 8.10. Paul Jr. sought legal advice from Biorn, and paid him $5,000. 6 Id. ¶¶ 8.10, 48, 102. Biorn “intentionally or negligently advised him that any potential claims 7 arising out of those transfers were time-barred.” Id. ¶ 103. Biorn did not advise Paul Jr. that the 8 2005 transfers were ineffective, and that a 2006 order from the Probate Court had to be obtained to 9 make the transfers effective. Id. ¶¶ 103-04. Paul Jr. asserts that “[b]ut for Biorn’s negligence 10 Paul, Jr, would have learned of the 2006 probate proceeding and instructed Biorn to move to set it 11 aside as a fraud on the court.” Id. ¶ 104. The FAC alleges that “Paul, Jr. did not learn about the 12 2006 order ratifying the 2005 deathbed transfers until June 12, 2019.” Id. ¶ 26. 13 Biorn argues that it appears on the face of these allegations that the legal malpractice claim 14 is time-barred. “An action against an attorney for a wrongful act or omission, other than for actual 15 fraud, arising in the performance of professional services shall be commenced within one year 16 after the plaintiff discovers, or through the use of reasonable diligence should have discovered, the 17 facts constituting the wrongful act or omission, or four years from the date of the wrongful act or 18 omission, whichever occurs first.” Cal. Civ. Proc. Code § 340.6(a). Biorn’s alleged negligence 19 occurred in 2012, and Paul Jr. filed this suit more than four years later, in 2021. The four-year 20 limitations period is tolled during any period that “[t]he attorney willfully conceals the facts 21 constituting the wrongful act or omission when those facts are known to the attorney.” Cal. Civ. 22 Proc. Code § 340.6(a)(3). Tolling does not appear on the face of the FAC, however, because the 23 FAC does not allege that the circumstances of the 2005 transfers and 2006 Probate Court order 24 were known to Biorn in 2012, or that he willfully concealed those facts from Paul Jr. The Court 25 thus agrees with Biorn that the legal malpractice claim appears to be time-barred. 26 In opposition to Biorn’s motion to dismiss, Paul Jr. argues that Biorn relies on the wrong 27 statutory limitations period. California Code of Civil Procedure § 340.6, cited by Biorn and 28 discussed above, is the statute applicable to claims of attorney malpractice “other than for actual 6 1 fraud.” Cal. Civ. Proc. Code § 340.6(a). Paul Jr. argues that his attorney malpractice claim is 2 based on actual fraud, and therefore is governed by California Code of Civil Procedure § 338(d), 3 which provides a three year limitations period for “[a]n action for relief on the ground of fraud or 4 mistake.” Cal. Civ. Proc. Code § 338(d). “The cause of action in that case is not deemed to have 5 accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.” 6 Id. Paul Jr. asserts that he discovered Biorn’s misconduct until June 2019, and he filed suit less 7 than three years later in June 2021. 8 United States District Court Northern District of California 9 In reply, Biorn argues that Paul Jr.’s legal malpractice claim is not currently framed as a claim for actual fraud. The Court agrees. To the extent Paul Jr. asserts a claim based on Biorn’s 10 alleged fraudulent concealment of the circumstances regarding the 2005 transfers and 2006 11 Probate Court order, the FAC does not allege that Biorn knew those circumstances at the time he 12 rendered Paul Jr. legal services in 2012. 13 Biorn’s motion to dismiss is GRANTED as to Claim 6. 14 E. 15 Having determined that the claims against Biorn are subject to dismissal, the Court must Leave to Amend 16 decide whether leave to amend is warranted. Leave ordinarily must be granted unless one or more 17 of the following factors is present: (1) undue delay, (2) bad faith or dilatory motive, (3) repeated 18 failure to cure deficiencies by amendment, (4) undue prejudice to the opposing party, and (5) 19 futility of amendment. Foman v. Davis, 371 U.S. 178, 182 (1962); see also Eminence Capital, 20 LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (discussing Foman factors). 21 The Court finds no undue delay (factor 1) or bad faith (factor 2). While Paul Jr. did amend 22 once as of right, he has not had an opportunity to amend after receiving guidance from the Court, 23 and therefore cannot be said to have repeatedly failed to cure his pleading’s deficiencies (factor 3). 24 At this early stage in the proceedings, the Court finds that granting further opportunity to amend 25 would not impose undue prejudice on Biorn (factor 4). Finally, it is not clear that amendment 26 would be futile (factor 5). Having weighed these factors, the Court determines that leave to amend 27 is appropriate. Plaintiff is advised that because all of his claims sound in fraud, the amended 28 complaint must comply with the pleading standard in Federal Rule of Civil Procedure 9(b). 7 1 2 IV. ORDER (1) as to all claims asserted against him, that is, Claims 1, 5, 6, and 11. 3 4 (2) Plaintiff Paul Jr.’s deadline to amend shall be thirty days after the Court’s ruling on the last of the three motions to dismiss filed by Defendants. 5 6 Defendant Biorn’s motion to dismiss is GRANTED WITH LEAVE TO AMEND (3) This order terminates ECF 59. 7 8 9 10 Dated: April 21, 2022 ______________________________________ BETH LABSON FREEMAN United States District Judge 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 8
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