The opinion of the court was delivered by: BREWSTER
ORDER DENYING DEFENDANT COLONIAL BANK'S MOTIONS TO DISMISS AND MOTION TO COMPEL MORE DETAILED RICO CASE STATEMENT
I. Case Type and Jurisdiction
This case is a class action brought on behalf of all class-member judgment creditors in the "Gutierrez Class," as certified in an earlier California state court action and by this Court. The class members seek to pursue their remedies against defendants under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-1968 and California statutory and common law. Plaintiffs seek treble damages, costs, and attorneys' fees. The Court has subject matter jurisdiction over RICO suits pursuant to 18 U.S.C. § 1964(c), and over the state law claims through supplemental jurisdiction under 28 U.S.C. § 1367.
There are four named plaintiffs and twenty-one defendants. The named plaintiffs and the approximately 29,000 class members were members of a state class action suit who obtained judgment against Defendant Charles J. Givens for false statements and misinformation regarding membership in the Charles J. Givens Organization, Inc. Of the twenty-one defendants, eleven are people and ten are business entities or trusts. The individual defendants are Givens and five of his family members, four of his attorneys, and his accountant. The organizational defendants include Colonial Bank f/k/a Southern Bank of Central Florida and ten holding companies or trusts allegedly controlled by Defendants. Plaintiffs allege that all twenty-one Defendants participated in a broad conspiracy to protect Givens' alleged millions of dollars of assets from the judgment and other legitimate debts.
During the fall of 1997, four groups of defendants moved 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) and for failure to plead fraud with particularity pursuant to FED. R. CIV. P. 9(b). Defendant Colonial Bank submitted additional motions to dismiss for lack of personal jurisdiction and improper venue, and moved for a more definite RICO case statement. On November 5, 1997, the Court granted Colonial's motion to dismiss for lack of personal jurisdiction, but provided Plaintiffs leave to amend their complaint. Colonial's other motions were dismissed as moot. The Court denied all other motions by the other defendants, finding that Plaintiffs had stated a cause of action under RICO and California state law. The Court also certified the proposed class action pursuant to Fed. R. Civ. P. 23. On December 15, 1997, Plaintiffs filed a First Amended Complaint ("FAC") repeating the initial allegations and realleging jurisdiction over Colonial Bank. On January 30, 1998, Colonial moved to dismiss the FAC for lack of personal jurisdiction, improper venue, failure to state a claim for which relief can be granted, and failure to plead fraud with particularity. In the alternative, Colonial moved to compel a more definite RICO case statement pursuant to Local Rule 11.1.
The 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' FAC, 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 more than 600,000 memberships nationwide and enjoyed annual revenues of "several hundred million dollars" from its seminars and other products.
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). The state court enjoined Givens from transferring, encumbering or selling any personal assets, and permitted expenditures only for ordinary, reasonable personal expenses and for attorneys' fees. Givens now claims that he has no assets from which to pay the judgment. On November 5, 1997, the state court found that Givens had repeatedly violated the injunction. The court held Givens in contempt, fining him $ 3000 and sentencing him to fifteen days in jail.
In 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. 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' FAC cites numerous transactions and alleged schemes as part of the conspiracy. The FAC alleges the involvement of each individual defendant, and provides dates and dollar amounts of many transactions and references specific documents.
Defendant Colonial Bank f/k/a Southern Bank of Central Florida is a financial banking institution located in Orlando, Florida, Givens' base of operations. Plaintiffs allege that the bank was formed in 1988 by "Givens and his confederates." The FAC alleges that Givens controlled the bank, directly owning the state-allowed maximum 25% of the outstanding shares and controlling substantial additional shares through individuals, including co-defendants Tedder and Givens' children, who held stock in their names on Givens' behalf. Givens allegedly conspired with current bank chairman Don Prewitt to nominally divest himself of some of his interests in the bank in response to a state investigation of his illegal ownership. However, Plaintiffs allege that "Givens repeatedly represented to the public that he owned Southern Bank, and an indicia of his ownership and control was his ability to place confederates in positions of domination and control at the bank."
Plaintiffs contend that with Givens' "illegal control of and Prewitt in place at Southern Bank, Givens was free to operate his money-transferring machine, unfettered by the constraints of government regulators or otherwise independent bank officers. By 1990, Southern Bank had joined the conspiracy to transfer Givens' assets beyond the reach of his creditors. Virtually all of the revenues received by the [Givens] Organization or Givens went into Southern Bank and were thereafter improperly transferred from the bank to various foreign entities and other members of the asset protection scheme." The FAC therefore alleges that "because of Givens' interest in and control of Southern Bank, Southern Bank knew of the fraudulent purpose for the asset transfers and facilitated those transfers."
Colonial moves to dismiss the FAC against it for lack of personal jurisdiction pursuant to Fed. R. Civ. P. 12(b)(2). Plaintiffs' first complaint rested its jurisdictional allegations against Colonial Bank solely upon RICO's nationwide service of process provision. Plaintiffs argued that personal jurisdiction may be invoked under RICO's 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 § 1965(b). However, in their first complaint, Plaintiffs failed to satisfy the requirements necessary to invoke § 1965(b), as set forth by 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). Therefore, the Court found that it "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."
Plaintiffs' FAC alleges that the Court may properly exercise personal jurisdiction over Colonial on both grounds. If personal jurisdiction may be established under traditional minimum contacts analysis, it will be unnecessary to evaluate RICO's supplemental provisions.
The Ninth Circuit has established a two-step test for determining the propriety of asserting personal jurisdiction. First, the relevant state's long-arm statute must permit jurisdiction. Second, the exercise of jurisdiction must be consistent with the demands of due process. Greenspun v. Del E. Webb Corporation, 634 F.2d 1204, 1207 (9th Cir. 1980) (citations omitted). As to the first inquiry, California Civil Procedure Code § 410.10 provides that "a court of this state may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States." CAL. CIV. PROC. CODE § 410.10 (Deering 1991). Therefore, the "statutory limitations upon jurisdiction are coextensive with the outer limits of due process under the state and federal constitutions, as those limits have been defined by the United Sates Supreme Court." Data Disc, Inc. v. Systems Technology Associates, Inc., 557 F.2d 1280, 1286 (9th Cir. 1977) (internal quotation omitted). Therefore, California authorizes jurisdiction whenever the second inquiry, the demands of due process, is satisfied.
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 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 a suit 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. The required prima facie showing must be of either general or specific jurisdiction. To defeat a 12(b)(2) motion to dismiss, Plaintiffs need only demonstrate facts that if true would support jurisdiction over the defendant. Ballard v. Savage, 65 F.3d 1495, 1498 (9th Cir. 1995).
General jurisdiction exists where a non-resident defendant's activities in the state are "substantial" or "continuous and systematic." Data Disc, Inc., 557 F.2d at 1287.
The Ninth Circuit has articulated a three-prong analysis for determination of specific jurisdiction:
(1) The nonresident defendant must do some act or consummate some transaction with the forum or perform some act by which he purposefully avails himself of conducting activities in the forum, thereby invoking the benefits and protections of its laws.
(2) The claim must be one which arises out of or results from the defendant's forum-related activities.
(3) Exercise of jurisdiction must be reasonable.
Id. In short, whether specific jurisdiction exists "turns on an evaluation of the nature and quality of the defendant's contacts in ...