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Belczak v. Shute

October 5, 2009

TIM BELCZAK, ET AL.
v.
JAMES SHUTE, ET AL.



The opinion of the court was delivered by: The Honorable Andrew J. Guilford

CIVIL MINUTES - GENERAL

Lisa Bredahl None Present

Proceedings: ORDER GRANTING DEFENDANTS' MOTION FOR JUDGMENT ON THE PLEADINGS

Defendants James and Patricia Shute ("Defendants") have brought a Motion for Judgment on the Pleadings ("Motion"). Because the Court finds that Plaintiffs have failed to allege a sufficient effect on interstate commerce, as required by RICO, Defendants' Motion is GRANTED.

BACKGROUND

The following facts are taken from Plaintiffs' Complaint, and for the purposes of this Motion, the Court assumes them to be true.

Plaintiffs John and Tim Belczak, Joe and David Shaheen, Jerry Sandler, Jerry Kronquist, Jim Doyle, Frank Kirby, and Jeff Millers (collectively, "Plaintiffs"), all California residents, invested their money with California Dream Properties, LLC, a company owned and operated by Defendants James and Patricia Shute, also California residents. On June 1, 2005, California Dream Properties signed a contract to purchase 1.4 acres of vacant land in Corona, California, intending to construct nineteen condominium units on the property. (Compl. ¶ 8.) Plaintiffs loaned California Dream Properties $1,500,000 to finance the project. (Compl. ¶ 22.) Due in substantial part to Jim Shute's delays and financial indiscretions, the condominium project fell apart, and Plaintiffs lost their investment.

Based on these facts and others, Plaintiffs have brought two claims against the Shutes: (1) a claim for violation of Section 1962(c) of the federal Racketeer Influenced and Corrupt Organizations Act ("RICO"); and (2) a claim for violation of Section 1962(d) of RICO. In July 2009, Defendants moved for judgment on the pleadings ("Defendants' First MJOP"), and the Court granted the motion because Plaintiffs failed to allege a sufficient effect on interstate commerce, as required by RICO. (Order Granting Motion for Judgment on the Pleadings, June 29, 2009, Docket No. 20 ("June 29 Order".) Plaintiffs filed a First Amended Complaint ("FAC") on July 21, 2009. Defendants now bring this Motion.

LEGAL STANDARD

"After the pleadings are closed but within such time as not to delay the trial, any party may move for judgment on the pleadings." Fed. R. Civ. P. 12(c). Rules 12(b)(6) and 12(c) are substantively identical. See William W. Schwartzer, A. Wallace Tashima & James M. Wagstaffe, Federal Civil Procedure Before Trial § 9:319. For a 12(c) motion, the Court accepts the allegations of the non-moving party as true. Hal Roach Studios, Inc. v. Richard Feiner & , 896 F.2d 1542, 1550 (9th Cir. 1989) (citing Doleman v. Meiji Mutual Life Ins. Co., 727 F.2d 1480, 1482 (9th Cir 1984)). If the complaint fails to articulate a legally sufficient claim, the complaint should be dismissed or judgment granted on the pleadings. Id.

DISCUSSION

Defendants argue, among other things, that Plaintiffs' RICO claims must fail because Plaintiffs have not alleged the impact on interstate commerce required under RICO. The Court agrees.

RICO applies only to an "enterprise engaged in, or the activities of which affect, interstate or foreign commerce." 18 U.S.C. § 1962(c). The plaintiff bears the burden of proving an effect on interstate commerce. Musick v. Burke, 913 F.2d 1390, 1398 (9th Cir. 1990). In a civil RICO prosecution, the plaintiffs must show at least a "minimal" connection with interstate commerce, and must show more than the fact that an alleged RICO enterprise has purchased goods and supplies from out of state. Id.

In the July 29 Order, the Court held that Plaintiffs allegations that Defendants purchased "local equipment and supplies that are manufactured out-of-state," and "made direct out-of-state purchases of supplies, materials, equipment, and vehicles" were insufficient to identify a relevant aspect of interstate commerce ...


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