assets from the judgment and other legitimate debts.
B. The Motions
Four groups of defendants have submitted their own motions.
In many cases, Defendants have joined each others' motions. All four groups moved to dismiss for failure to state a claim upon which relief can be granted pursuant to FED. R. CIV. P. 12(b)(6) and for failure to plead fraud with particularity pursuant to FED. R. CIV. P. 9(b). The primary argument made by Defendants is that Plaintiffs fail to state a claim, per se, against anyone. Therefore, most of this Order proceeds claim by claim, rather than by defendant. However, issues related to specific defendants are noted separately when appropriate. Defendant Colonial Bank has submitted additional motions to dismiss for lack of personal jurisdiction and improper venue, and has moved for a more definite RICO case statement. Because Colonial's motions to dismiss for lack of personal jurisdiction, if granted, would be dispositive of all claims against it, it will be addressed first.
C. Factual Background
The proposed class
includes all current or former California residents who purchased memberships in the Charles J. Givens Organization, Inc. between May 5, 1986 and March 17, 1993, and who did not opt out of the class action in California Superior Court entitled Cella Gutierrez, et al. v. Charles J. Givens Organization, Inc., et al., Case No. 667169 (Super. Ct., San Diego Cty.) The class in that action claimed that Givens defrauded them through negligent misrepresentations and violated California's Consumer Legal Remedies Act and other statutory and common law provisions. Members paid significant membership fees to join the Givens Organization. According to Plaintiffs' Complaint, new memberships were sold for $ 295-998, dues ranged from $ 80-129 per year, the fee for the four-day real estate seminar ranged from $ 495-1695, and the prices for tax consulting were between $ 299 and $ 570. Plaintiffs allege that, by the end of 1994, the Organization had sold over 600,000 memberships nationwide and enjoyed annual revenues of "several hundred million dollars" from its seminars and other products. Complaint P 13.
On July 22, 1996, the Superior Court, acting upon the jury's verdict, entered a judgment against Givens personally in the amount of $ 9,438,027 in compensatory damages, $ 4,719,013.50 in punitive damages, and $ 2,889,551.56 in costs and attorneys' fees, for a total liability of $ 17,046,592.06.
Statutory interest continues to accrue at a rate of 10% per annum on the judgment and costs pursuant to C.C.P. § 685.010(a). Givens now claims that he has no assets from which to pay the judgment.
In or about 1990, a civil suit entitled Beadle v. Charles J. Givens, et al., was commenced in the U.S. District Court for the Northern District of Iowa. (Civ. No. C90-143). The suit was apparently founded upon alleged misleading statements made by and on behalf of Givens that led individuals to drop uninsured motorist coverage. Complaint P 54. Similar lawsuits were filed in other states in 1992 and 1993. Plaintiffs allege that, at some point in 1991 or 1992, Defendants recognized Givens' and the Organization's vulnerability to judgment creditors, and began to conspire to place Givens' assets beyond the reach of these anticipated creditors.
Plaintiffs' Complaint cites numerous transactions and alleged schemes as part of the conspiracy. They allege the involvement of each individual defendant. The Complaint provides dates and dollar amounts of many transactions, and sometimes references specific documents that were probably obtained in discovery from the state court litigation.
Many of the claims focus on Givens' primary attorney, defendant David Hamilton Tedder, a self-proclaimed specialist in "Asset Protection." Tedder was a partner in a small firm with co-Defendants Chatsky and Berends; Defendant Reiserer worked for the firm as an independent contractor. Plaintiffs allege that tens of millions of Givens' assets were transferred from Givens and his Organization to holding companies controlled by Givens, Tedder, or other defendants, and to trusts for the benefit of Givens' family members. Plaintiff alleges that Tedder "has a long history of involvement in swindles" and has been investigated numerous times by the California State Bar and the Internal Revenue Service. Complaint P 20.
Four Defendants are members of Givens' family. Charles Givens III, Givens' son, was a President and CEO of the Givens Organization and an officer of some of the alleged holding companies. He is also a beneficiary of two foreign trusts allegedly established to shield Givens' assets. Similar allegations were offered against another son, Robert Givens, and Givens' wife, Adena Givens. Finally, the Complaint names Bonnie Givens, Givens' ex-wife, as a participant through her role as bookkeeper of the Organization.
Defendant Colonial Bank f/k/a Southern Bank of Central Florida is a financial banking institution located in Orlando, Florida, Givens' base of operations. The bank allegedly facilitated the asset transfers complained of in this action. Plaintiffs allege that "Givens and his associates hold (or at one time held) substantial stock in Southern Bank and partially control (or controlled) it," and therefore the bank understood the fraudulent purpose of the transfers. Complaint P 24.
If Plaintiffs' allegations are taken as true, Defendants as a group were clearly involved in a complicated scheme to protect Givens' assets. While some Defendants may have been more or less culpable, or even completely innocent, the complexity of the allegations makes it difficult to differentiate between them on the basis of the record before the Court. While not every Defendant may have been involved in every challenged transaction, Plaintiffs maintain that all Defendants were aware of and participated in the overarching conspiracy. In any case, the Complaint alleges involvement by each Defendant individually at least once.
A. Colonial's Motion to Dismiss for Lack of Personal Jurisdiction
Colonial has moved to dismiss the complaints against it for lack of personal jurisdiction pursuant to Fed. R. Civ. P. 12(b)(2). Usually, a defendant must have sufficient "minimal contacts" with the forum so that the Court's exercise of jurisdiction does not "offend traditional notions of fair play and substantial justice." Data Disc, Inc., 557 F.2d 1280 at 1287 (citing International Shoe Company v. Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 90 L. Ed. 95 (1945)). When a defendant moves to dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2), the plaintiff has the burden of making "a prima facie showing of jurisdictional facts." 557 F.2d at 1285-86.
Plaintiffs' Complaint makes no assertions that link Colonial to California, other than to associate them with a conspiracy that, as a whole, had California contacts. However, Plaintiffs argue that personal jurisdiction may be invoked under RICO through its provisions for nationwide service of process, and that this Court may exercise in personam jurisdiction directly by such service, pursuant to FED. R. CIV. P. 4(e) and RICO section 1965(b).
Recognizing the difficulty of choosing a forum for an action against a nationwide racketeering enterprise, Congress enacted 18 U.S.C. § 1965(b):
In any action under section 1964 of this chapter [RICO] in any district court of the United States in which it is shown that the ends of justice require that other parties residing in any other district be brought before the court, the court may cause such parties to be summoned, and process for that purpose may be served in any judicial district of the United States by the marshal thereof.
The Ninth Circuit found that Congress intended the "ends of justice" provision to enable plaintiffs to bring all members of a nationwide RICO conspiracy before a court in a single trial. Butcher's Union Local No. 498, United Food and Commercial Workers et al. v. SDC Investment, Inc., et al., 788 F.2d 535, 539 (9th Cir. 1986). Many courts, including the Ninth Circuit, have found that nationwide service provisions expand the jurisdictional reach of a federal court, and that a nationwide contacts test supplants the traditional forum-contacts analysis of International Shoe. See, e.g., Go-Video, Inc. v. Akai Elec. Co., Ltd., 885 F.2d 1406, 1414-1416 (9th Cir. 1989).
However, before the Court may exercise jurisdiction under § 1965(b), Plaintiffs bear the burden of showing that this case is eligible to invoke the nationwide jurisdictional provisions of RICO. In Butcher's Union, the Ninth Circuit held that for nationwide service to be imposed under § 1965(b), the court must have personal jurisdiction over at least one of the participants in the alleged multidistrict conspiracy and the plaintiff must show that there is no other district in which a court will have personal jurisdiction over all of the alleged co-conspirators. Butcher's Union, 788 F.2d at 539. Plaintiffs have not demonstrated that no other district exists in which all Defendants would be subject to jurisdiction. Therefore, personal jurisdiction cannot be established under § 1965(b) at this time.
The Complaint does not allege jurisdiction over Colonial under the California long-arm statute-in fact, the statute is said to be "irrelevant to this Court's proper exercise of personal jurisdiction over [Colonial]." Plaintiff's Opposition, p. 22 (emphasis in original). Where the Plaintiffs have failed to assert any alternative bases of jurisdiction, the Court declines to do so. See Butcher's Union, 788 F.2d at 540.
Therefore, this Court cannot exercise personal jurisdiction over Colonial Bank unless Plaintiffs either satisfy the conditions of Butcher's Union or establish the requisite jurisdictional facts regarding Colonial's contacts with California. All claims against Colonial are dismissed with thirty days leave to amend. Colonial's other motions to dismiss, and its motion for a more detailed RICO case statement, are denied as moot.
B. Defendants' 12(b)(6) Motions to Dismiss
The remaining defendants all move to dismiss Plaintiffs' Complaint for failure to state a claim upon which relief can be granted pursuant to Fed. R. Civ. P. 12(b)(6).
1. Standard of Law
A motion to dismiss for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6) tests the legal sufficiency of the claims in the complaint. This court must accept as true all material allegations in the complaint, as well as reasonable inferences to be drawn from them, and must construe the complaint in the light most favorable to plaintiff. NL Industries, Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986); Parks School of Business, Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). The court need not, however, accept every allegation in the complaint as true; rather, the court "will examine whether conclusory allegations follow from the description of facts as alleged by the plaintiff." Holden v. Hagopian, 978 F.2d 1115, 1121 (9th Cir. 1992) (citation omitted).
2. Could Plaintiffs' pleadings state a RICO claim against anyone?
Defendants argue that Plaintiffs fail to state a claim under RICO, 18 U.S.C. §§ 1961-1968 because the Complaint fails to plead the predicate criminal acts, and therefore none of the Defendants, nor anyone else, could be liable.
a. Governing Law: Civil RICO
Congress enacted the Racketeer Influenced and Corrupt Organizations Act ("RICO") with the specific intent to "thwart the organized criminal invasion and acquisition of legitimate business enterprises and property." Oscar v. University Students Co-Operative Assn., 965 F.2d 783, 786 (9th Cir.1992). Section 1964(c) provides that:
any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney's fee . . . .