The opinion of the court was delivered by: Frank C. Damrell, Jr. United States District Judge
This matter is before the court on defendants' various motions to dismiss Natomas Garden Investment Group LLC and Orchard Park Development LLC's (collectively, "plaintiffs") first amended complaint ("FAC"). Defendant Larry Deane files a motion to dismiss plaintiffs' FAC pursuant to Federal Rule of Civil Procedure 12(b)(6)*fn1 or, in the alternative, to stay this action pursuant to Colorado River Water Conservation District v. U.S., 424 U.S. 800 (1976). Defendants John Sinadinos, Stanley Foondos, Stephen Foondos, Village Capital Group LLC, Vintage Creek LLC, South Watt & Florin Partners, Chi-Sac Florin Vineyards Investors LLC, Caselman & Carlisle Partners, Chi-Sac Gap Investors, Prime Minister Group LLC, Park Ridge Investments LLC, Chi-Sac South Sutter Investors, Chi-Sac White Rock 150 Investors LLC, Chicago South Watt Investors LLC, Chicago Infill Investors LLC, Glenn Sorenson, Jr., and Stockton & 65th LP (collectively, the "Sinadinos defendants") file a motion for judgment on the pleadings pursuant to Rule 12(c). Lastly, defendants Baljit Johl and Harinder Johl (collectively, the "Johls") file a motion to dismiss plaintiffs' FAC pursuant to Rules 12(b)(6) and 9(b) or, in the alternative, move for a more definite statement pursuant to Rule 12(e). Plaintiffs oppose the motions. For the reasons set forth below, defendants' various motions*fn2 are GRANTED in part and DENIED in part.*fn3
This case arose out of a failed business venture between Eric Solorio ("Solorio") and defendants John Sinadinos ("Sinadinos"), Larry Deane ("Deane"), and their various alleged co-conspirators. Beginning in 2003, Solorio negotiated to obtain rights to purchase undeveloped real property from several property owners in the Sacramento area. (First Am. Coml. ("FAC"), ¶ 43.) Solorio endeavored to subsequently develop and sell this land, for which he formed a limited liability company, plaintiff Natomas Gardens Investment Group LLC ("Natomas"). (Id. at ¶¶ 43-44.) In seeking financing for his potential project, Solorio met defendants Deane and Sinadinos. (Id. at ¶ 45.) Sinadinos, an attorney who was related to a major developer in the Sacramento region, immediately showed interest in the project and agreed to partner with Solorio. (Id. at ¶¶ 45-46.) Sinadinos recommended that Stanley Foondos, a certified public accountant, support Solorio's proposed development project through performance of all accounting and tax reporting responsibilities. (Id. at ¶ 51.)
By the end of 2003, Solorio, acting on behalf of plaintiff Natomas, had assembled purchase rights to a number of contiguous parcels in the Sacramento area, upon which Sinadinos made the necessary deposits in escrow. (Id. at ¶ 52.) By mid-2004, Natomas had obtained rights to purchase and develop fourteen parcels of land in Sacramento County comprising approximately 109 acres. (Id. at ¶ 53.) This development project was designated Florin Vineyards, and Sinadinos formed a limited liability company, Village Capital Group LLC ("Village"), as the development company associated with the project. (Id. at ¶¶ 53-54.) Plaintiff Natomas was given a 45 percent stake in Village, while the other 55 percent was held by Chi-Sac Village Capital Group Investors LLC ("Village Investors LLC"), a company managed and controlled by Sinadinos and Stanley Foondos. (Id. at ¶¶ 12, 20.)
By October 2004, plaintiff Natomas had obtained rights to purchase and develop seventeen additional parcels of land comprising approximately 85 acres. (Id. at ¶ 55.) This development project was designated Vintage Creek, and Sinadinos formed another limited liability company, Vintage Creek LLC ("Vintage"), as the development company associated with the project. (Id. at ¶¶ 55-56.) Similar to the respective interests in Village, Natomas was given a 45 percent stake in Vintage, while the other 55 percent was held by Chi-Sac Vintage Creek Investors LLC ("Vintage Investors LLC"), a company managed and controlled by Sinadinos and Stanley Foondos. (Id. at ¶¶ 12, 21.)
Additionally, during April-May 2005, Solorio assembled property acquisition rights for a development project located in Madera County, California. (Id. at ¶ 60.) Solorio, acting through his own limited liability company, plaintiff Orchard Park LLC ("Orchard Park"), negotiated and executed five option agreements to purchase contiguous parcels of real property comprising approximately 265 acres. (Id.) Acting upon Sinadinos' representations as to his substantial development experience, Solorio agreed to include Sinadinos as a shareholder of Madera Avenue 12 Capital Group LLC ("Madera"), a limited liability company formed for the development of the Madera properties. (Id. at ¶ 61.)
Sinadinos represented to Solorio that he would invest $4,000,000 in each project for acquisition and development costs. (Id. at ¶ 57.) Upon expressing concern with Sinadinos' prior development project experience and ability to finance the various projects, Sinadinos provided Solorio with meeting minutes between Sinadinos and various individuals in Chicago who Sinadinos had brought on as investors in Village and Vintage. (Id. at ¶ 58.)
In mid-2004, Solorio, on behalf of plaintiff Natomas, insisted that operating agreements for Village and Vintage be drafted before homebuilders sought to purchase interests in the projects. (Id. at ¶ 85.) Sinadinos, however, delayed drafting the operating agreements until homebuilders were on the verge of purchasing interests in the projects. (Id. at ¶¶ 85-90.) Although Solorio had numerous objections to the proposed operating agreements, he was pressured into signing the agreements by the immediacy of the homeowners' investments and thereby made substantial concessions to Sinadinos and his alleged co-conspirators. (Id.) Notably, Solorio transferred Natomas' property acquisition rights in Vintage to Sinadinos and his co-conspirators. (Id. at ¶ 87.) Sinadinos also pressured Solorio to execute an amendment to Vintage's operating agreement that provided Sinadinos with an additional $400,000 concession. (Id.)
During approximately May 2004, Sinadinos and Stanley Foondos began commingling funds between Village and Vintage. (Id. at ¶¶ 66-70.) Although Solorio requested on numerous occasions that Sinadinos and Stanley Foondos provide Natomas with a comprehensive financial report, Sinadinos and Foondos either ignored Solorio's requests or failed to disclose the details of the companies' various financial dealings. (Id. at ¶ 69.)
In November 2004, KB Homes entered into a purchase agreement with Village and made an initial deposit of over $2 million, after which Sinadinos and his co-conspirators began to fraudulently inflate their capital accounts in Village. (Id. at ¶¶ 71-72.) At this time, Glenn Sorenson, Jr. ("Sorenson") and his company, Stockton & 65th LP, invested approximately $3 million in Village in the form of a 1031 tax exchange. (Id. at ¶ 72.) Sinadinos promised Sorenson an annual 25 percent rate of return on his investment, and planned to use the funds to purchase a parcel owned by Baljit Johl, who had granted plaintiff Natomas an option to purchase the parcel at any time during the next several years. (Id. at ¶ 73.) Although Solorio objected to Sorenson's rate of return and Sinadinos' proposed use of investment funds, Sinadinos convinced Solorio to agree to Sorenson's investment on the promise that Sorenson would option the Johl parcel back to Village. (Id. at ¶¶ 73-75.) Through a series of fraudulent transactions set forth in greater detail infra, Sinadinos obtained an approximate profit of $800,000 through the transfer of the Johl parcel, transferred these funds to Village, and claimed that the transferred funds were additional capital invested by Sinadinos and his co-conspirators. (Id. at ¶¶ 79-80.) Additionally, Sinadinos used the remainder of Sorenson's investment that was not applied toward the Johl parcel to acquire another parcel in Village, the Von Behren parcel.
(Id. at ¶ 81.) Contrary to Sinadinos' and Sorenson's promises to Solorio, however, Sinadinos did not obtain an option agreement from Sorenson to option the Johl and Von Behren parcels back to Village. (Id. at ¶ 82.) As a result, plaintiff Natomas was defrauded of its purchase rights in the Johl and Von Behren parcels, as Village lacked contractually defined rights to repurchase the parcels on the favorable terms promised by Sinadinos and his co-conspirators. (Id.)
Further, between June 2004 and December 2007, Sinadinos and his co-conspirators loaned approximately $2,155,000 from Vintage to Village, only $825,000 of which was reimbursed to Vintage. (Id. at ¶ 91.) Sinadinos and his co-conspirators used the remaining $1,330,000 to inflate their capital accounts in Vintage, thereby allegedly engaging in conversion and money laundering. (Id.) Moreover, beginning in November 2004, Sinadinos and his co-conspirators transferred substantial funds from Village and Vintage directly to themselves. (Id. at ¶ 93.) To accomplish such transfers, Sinadinos and his co-conspirators engaged in loan transactions that were never repaid, or received double repayment of funds actually loaned to Village and Vintage. (Id. at ¶¶ 94-116, 132-141.) Sinadinos also held himself out as the attorney for Village, Vintage, Madera, and their various investors, and paid himself and his law office approximately $354,000 for undocumented legal services between June 21, 2004 and October 15, 2007. (Id. at ¶¶ 167-175.) Likewise, Sinadinos used funds from Madera to pay his law firm staff and secretarial expenses, and "repaid" himself for fictional loans made to Madera. (Id. at ¶¶ 142-147, 172-175.)
Additionally, Sinadinos unlawfully transferred an equity interest in a Vintage parcel in exchange for a settlement and release of claims by Surjit Johl, Baljit Johl, and Harinder Johl, as set forth in greater detail infra. (Id. at ¶¶ 176-179.) Although Solorio communicated with Baljit and Harinder Johl that the transfer of the equity interest in the parcel could not occur without plaintiff Natomas' consent, the Johls nonetheless proceeded to execute the release with Sinadinos. (Id. at ¶ 181.)
Sinadinos and his co-conspirators also engaged in fraud to lure new investors to contribute capital to Village and Vintage. (Id. at ¶¶ 119-131.) Although Sinadinos and his co-conspirators were aware that Village and Vintage were doomed to financial failure due to the conspirators' self-serving financial dealings, they informed potential investors that Village and Vintage were financially viable projects. (Id.) The first such defrauded investor was Margarida Leavitt, who was referred to Sinadinos by Stephen Foondos, Ms. Leavitt's attorney. (Id. at ¶¶ 119-122.) Sinadinos and his co-conspirators used part of Ms. Leavitt's $1.2 million investment to purchase an equity interest in a parcel associated with Vintage, and the remaining amount to reimburse their prior investments without reducing their stated capital accounts. (Id. at ¶ 123.) Sinadinos and his co-conspirators engaged in a similar fraud to acquire investment proceeds from the Vathis family. (Id. at ¶¶ 124-131.)
Sinadinos then confided in Solorio, admitting that he had defrauded Ms. Leavitt and asking Solorio to assist in preserving the false appearance that Vintage was a successful development project. (Id. at ¶ 148.) After learning of Sinadinos' fraudulent activity, Solorio repeatedly requested to look at the financial books and records of Village, Vintage, and Madera. (Id. at ¶¶ 149-150.) Sinadinos repeatedly denied Solorio access to the books and records, and Solorio subsequently retained the services of an attorney, Thomas Barth, and a forensic accounting firm, Ueltzen & Company ("Ueltzen"), to aid in inspecting all requested financial documents. (Id. at ¶¶ 149-152.) Following persistent requests from Thomas Barth, Sinadinos agreed to allow an employee of Ueltzen to inspect all records, yet the copies provided by Sinadinos for inspection were not complete. (Id. at ¶¶ 153-155.) Plaintiffs allege that Sinadinos refused to allow Solorio and plaintiffs Natomas and Orchard Park access to company records and documents, which by law should have been made available to them. (Id. at ¶ 159.) Additionally, plaintiffs allege that, in response to Solorio's request for all financial documents, Sinadinos and Stanley Foondos provided Solorio with false tax returns, and that for a number of years Sinadinos and Stanley Foondos have been reporting fraudulent tax returns for Village, Vintage, and Madera to the Internal Revenue Service. (Id. at ¶¶ 161-166.)
Around April 2008, Deane, through counsel Don Wanland ("Wanland") demanded that Solorio abandon all claims against Sinadinos. (Id. at ¶ 187.) Wanland represented that Deane had seen the financial records for Village and Vintage and was convinced that there was no factual or legal basis that Sinadinos had engaged in any wrongdoing. (Id.) Despite entreaties from Deane, however, Solorio refused to abandon his claims against Sinadinos. (Id. at ¶¶ 188-189.) Due to the dispute between Deane and Solorio as to the legitimacy of Solorio's legal claims, Deane filed suit in state court to dissolve Natomas, as set forth in greater detail infra. (Id. at ¶¶ 188-190.) Plaintiffs allege that Deane, with full awareness of Sinadinos' fraudulent and unlawful conduct, has conspired with Sinadinos to prevent Solorio from investigating and pursuing claims against Sinadinos and his co-conspirators. (Id.)
Plaintiffs allege claims against defendants for individual violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961, et seq. ("RICO"), RICO conspiracy, fraud, breach of fiduciary duty, professional legal malpractice, professional accounting malpractice, and conversion. (Id. at ¶¶ 192-251.)
I. Motion to Dismiss for Failure to State a Claim
On a motion to dismiss, the allegations of the complaint must be accepted as true. Cruz v. Beto, 405 U.S. 319, 322 (1972). The court is bound to give the plaintiff the benefit of every reasonable inference to be drawn from the "well-pleaded" allegations of the complaint. Retail Clerks Int'l Ass'n v. Schermerhorn, 373 U.S. 746, 753 n.6 (1963). Thus, the plaintiff need not necessarily plead a particular fact if that fact is a reasonable inference from facts properly alleged. See id.
Nevertheless, it is inappropriate to assume that the plaintiff "can prove facts which it has not alleged or that the defendants have violated the . . . laws in ways that have not been alleged." Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983). Moreover, the court "need not assume the truth of legal conclusions cast in the form of factual allegations." United States ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n.2 (9th Cir. 1986).
Ultimately, the court may not dismiss a complaint in which the plaintiff has alleged "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1974 (2007). Only where a plaintiff has not "nudged [his or her] claims across the line from conceivable to plausible," is the complaint properly dismissed. Id. "[A] court may dismiss a complaint only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002) (quoting Hudson v. King & Spalding, 467 U.S. 69, 73 (1984)).
In ruling upon a motion to dismiss, the court may consider only the complaint, any exhibits thereto, and matters which may be judicially noticed pursuant to Federal Rule of Evidence 201. See Mir v. Little Co. Of Mary Hospital, 844 F.2d 646, 649 (9th Cir. 1988); Isuzu Motors Ltd. v. Consumers Union of United States, Inc., 12 F. Supp. 2d 1035, 1042 (C.D. Cal. 1998).
II. Motion for Judgment on the Pleadings
The standard governing a Rule 12(c) motion for judgment on the pleadings is basically the same as that which governs Rule 12(b) motions. The motion should be granted if, accepting as true all material allegations contained in the nonmoving party's pleadings, the moving party is entitled to judgment as a matter of law. See Hal Roach Studios v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1550 (9th Cir. 1989).
III. Motion for a More Definite Statement
A motion for a more definite statement should not be granted unless a pleading is "so vague or ambiguous that a party cannot reasonably be required to frame a responsive pleading." Rule 12(e). This liberal standard is consistent with Rule 8(a)(2), which only requires pleadings that contain a "short and plain statement of the claim." The Federal Rules of Civil Procedure anticipate that the parties will familiarize themselves with the claims and ultimate facts through the discovery process. See Famolare, Inc. v. Edison Brothers Stores, Inc., 525 F. Supp. 940, 949 (E.D. Cal. 1981). Indeed, "where the information sought by the moving party is available and/or properly sought through discovery, the motion should be denied." Id.
Preliminarily, the Sinadinos defendants and Deane seek to dismiss plaintiffs' FAC on the basis that plaintiffs' state law claims predominate over plaintiffs' federal claims, and thus the court should decline subject matter jurisdiction over the entire matter.
Title 28 U.S.C. § 1367(c) provides, in relevant part: "The district courts may decline to exercise supplemental jurisdiction over a claim under subsection (a) if - . . . (2) the claim substantially predominates over the claim or claims over which the court has original jurisdiction; (3) the district court has dismissed all claims over which it has original jurisdiction." "[U]nless a court properly invokes a section 1367(c) category in exercising its discretion to decline to entertain pendent claims, supplemental jurisdiction must be asserted." Executive Software N.A., Inc., v. U.S. Dist. Ct., 24 F.3d 1545, 1556 (9th Cir. 1994) (overruled on other grounds by Cal. Dept. Of Water Resources v. Powerex Corp., 533 F.3d 1087, 1091 (9th Cir. 2008). "It has consistently been recognized that pendent jurisdiction is a doctrine of discretion, not of plaintiff's right." Gibbs, 383 U.S. at 726. The justification for pendent jurisdiction "lies in considerations of judicial economy, convenience and fairness to litigants; if these are not present a federal court should hesitate to exercise jurisdiction over state claims." Id. (internal citation omitted). "[I]f it appears that the state issues substantially predominate, whether in terms of proof, of the scope of the issues raised, or of the comprehensiveness of the remedy sought, the state claims may be dismissed without prejudice and left for resolution to state tribunals." Id. at 726-27.
Defendants cite Bodenner v. Graves, 828 F. Supp. 516, 518 (W.D. Mich. 1993), for the proposition that since plaintiffs' state law claims substantially predominate over their federal claims, plaintiffs' action should be dismissed in its entirety. In Bodenner, the court dismissed a suit filed by the plaintiffs that alleged twenty-eight state-law claims and one RICO claim on the ground that state-law issues predominated in the matter. Id. First, the court dismissed the plaintiffs' various state-law claims pursuant to 28 U.S.C. Section 1367(c), as the court found that due to the sheer imbalance of state-law claims relative to the solitary RICO claim, "state law claims substantially predominate over the federal claim asserted." Id. at 518. Next, the court considered whether it could grant the defendants' request for a complete dismissal and dismiss the sole RICO claim as well. The court acknowledged that authority on this issue was sparse. Id. at 518-19. However, it turned to 18 U.S.C. § 1441(c), which the court stated was "closely analogous" to 28 U.S.C. § 1367 "with respect to the complete dismissal issue."
Id. Section 1441(c) authorizes complete dismissal where a case has been removed from state court to federal court and provides that the district court "in its discretion, may remand all matters in which State law predominates." Id. at 518. The court then cited numerous cases which it surmised stood for the proposition that an entire case may be dismissed under Section 1367(c) where state law issues predominate. Id. at 519. Relying on the authority of these cases, the court dismissed the plaintiffs' RICO claim, finding that the state law issues predominated in the matter. Id.
While defendants place much emphasis upon Bodenner for the proposition that, here, plaintiffs' entire case can be dismissed because state law issues predominate, the court notes that not only is Bodenner not controlling in this court, the court finds the decision wholly unpersuasive. See Borough of West Mifflin v. Lancaster, 45 F.3d 780, 786-87 (3rd Cir. 1995) (rejecting Bodenner's interpretation of Section 1441(c)). Title 28 U.S.C. § 1367(c) merely permits a court to decline supplemental jurisdiction over pendent state law claims; it does not permit the dismissal of federal claims over which the court has original jurisdiction. Only where such federal claims are otherwise dismissed, do the standards of Section 1367(c) come in to play.
Further, 28 U.S.C. § 1441(c) authorizes remand of all issues in which state law predominates only where the federal claims are "separate and independent" from the state law claims joined in the complaint. See Borough, 45 F.3d at 786. Since neither of these situations exist here, it is not proper to dismiss plaintiffs' entire suit.*fn5
Accordingly, defendants' motion to dismiss plaintiffs' FAC for lack of subject matter jurisdiction is DENIED.
II. Colorado River Abstention
The Sinadinos defendants and Deane seek to stay the federal court proceeding on the basis that duplicative judgments will result if plaintiffs are allowed to proceed with this federal action.
The abstention doctrine*fn6 formulated in Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976), provides that in the presence of a concurrent state court proceeding, a federal court can abstain from hearing an action based on "considerations of [w]ise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation." Id. at 817.
"Abstention from the exercise of federal jurisdiction is the exception, not the rule." Id. at 813. "Generally, as between state and federal courts, the rule is that 'the pendency of an action in the state court is no bar to proceedings concerning the same matter in the Federal court having jurisdiction.'" Id. at 817 (quoting McClellan v. Carland, 217 U.S. 268, 282 (1910)). Therefore, the application of the Colorado River doctrine can be justified "only in the exceptional circumstances where the order to the parties to repair to the State court would clearly serve an important countervailing interest." Id. at 813 (internal quotations omitted). As such, "the circumstances permitting the dismissal of a federal suit due to the presence of a concurrent state proceeding for reasons of wise judicial administration are considerably more limited," though these circumstances "do nevertheless exist." Id. at 818.
Application of what has become known as the Colorado River doctrine requires a court first to address the threshold question of whether there are parallel state and federal proceedings involving the same matter. Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 13-15 (1983). Exact parallelism is not required for the Colorado River doctrine to apply. Nakash v. Marciano, 882 F.2d 1411, 1416 (9th Cir. 1989). "It is enough if the two proceedings are 'substantially similar.'" Id.; Quackenbush, 87 F.3d at 297 (abstention appropriate under Colorado River doctrine even though the plaintiff in federal action claimed it was no longer a party to the state proceeding). A proceeding is substantially similar if "substantially the same parties are contemporaneously litigating substantially the same issues in another forum." Interstate Material Corp. v. City of Chicago, 847 F.2d 1285, 1288 (7th Cir. 1988). "[T]he requirement of 'parallel' state court proceedings implies that those proceedings are sufficiently similar to the federal proceedings to provide relief for all of the parties' claims." Intel Corp. v. Advanced Micro Devices, Inc., 12 F.3d at 913 n.4 (9th Cir. 1994) (citing Nakash, 882 F.2d at 1416); see also Crawley v. Hamilton County Com'rs, 744 F.2d 28, 31 (6th Cir. 1984) (holding that the issue of whether the state court proceedings are parallel must be determined in accordance with how the state court proceedings currently exist, rather than how the state court proceedings may be modified by amended cross-complaints or joinder of additional parties).
If the threshold question of similarity is answered in the affirmative, the court must then determine whether the sort of "exceptional circumstances" warranting a stay or dismissal are appropriate. The Supreme Court has set forth various factors that a district court should consider when assessing the appropriateness of a stay or dismissal in light of concurrent state court proceedings, including: (1) assumption by either court of jurisdiction over the res or property at dispute in the lawsuit; (2) the inconvenience of the federal forum, (3) the desirability of avoiding piecemeal litigation, and (4) the order in which jurisdiction was obtained by the concurrent forums. Id. at 818. In Moses H., the court also found relevant to the inquiry (5) whether federal law provides the decision on the merits, and (6) the probable inadequacy of the state court proceeding to protect the parties' rights. 460 U.S. at 23, 26. Further, the Ninth Circuit has recognized that forum shopping can in some cases justify Colorado River abstention. Fireman's Fund Ins. Co. v. Quackenbush, 87 F.3d 290, 297 (9th Cir. 1996) (citing Travelers Indem. Co. v. Madonna, 914 F.2d 1364, 1371 (9th Cir. 1990)). However, "[n]o one factor is necessarily determinative; a carefully considered judgment taking into account both the obligation to exercise jurisdiction and the combination of factors counseling against that exercise is required." Id. at 818-19 (citing Landis v. N. Am. Co., 299 U.S. 248, 254-55 (1936)). The factors are "to be applied in a pragmatic, flexible manner with a view to the realities of the case at hand." Moses H., 460 U.S. at 21.
"Under the rules governing the Colorado River doctrine, the existence of a substantial doubt as to whether the state proceedings will resolve the federal action precludes the granting of a stay." Intel, 12 F.3d at 913. Put another way, a district court may enter a Colorado River stay only if it has "nothing further to do in resolving any substantive part of the case" and has full confidence that the parallel state proceeding will "be an ...