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So v. Land Base


December 16, 2009


The opinion of the court was delivered by: Dean D. Pregerson United States District Judge


This matter comes before the Court on a Motion to Dismiss filed by the defendant Boris Lopatin ("Lopatin"), appearing pro se. After reviewing the papers submitted by the parties and considering the arguments raised therein, the Court DENIES the motion and adopts the following order.


The plaintiff Kevin So ("Plaintiff"), a wealthy businessman living in Hong Kong, alleges that he was duped by several conspiring co-defendants, including Lopatin, into investing $30 million in an elaborate Ponzi scheme known as the Private Placement Project. (Second Amended Complaint ("SAC") ¶¶ 22, 39.) Plaintiff asserts a number of causes of action against Lopatin and the other defendants, including, among others, fraud, conversion, and unjust enrichment.

Lopatin, appearing pro se, has filed what is styled as a Motion to Dismiss the SAC.*fn1 The motion asserts that the SAC should be dismissed because (1)Plaintiff lacks standing, (2) Plaintiff and Lopatin are parties to a binding arbitration agreement, and (3) venue is improper. Because courts have a duty to construe pro se motions liberally, the Court construes Lopatin's motion as (1) a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) based on Plaintiff's lack of standing; (2) a motion to dismiss for improper venue pursuant to Federal Rule of Civil Procedure 12(b)(3); and (3) a motion to compel arbitration.


A. Motion to Dismiss for Failure to State a Claim

1. Legal Standard

A complaint will survive a motion to dismiss when it "contain[s] sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). When considering a 12(b)(6) motion, a court must "accept as true all allegations of material fact and must construe those facts in the light most favorable to the plaintiff." Resnick v. Hayes, 213 F.3d 443, 447 (9th Cir. 2000). Although a pleading need not include "detailed factual allegations," it must be "more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Iqbal, 129 S.Ct. at 1949. Conclusory allegations or allegations that are no more than a statement of a legal conclusion "are not entitled to the assumption of truth." Id. at 1950. In other words, a pleading that merely offers "labels and conclusions," a "formulaic recitation of the elements," or "naked assertions" will not be sufficient to state a claim upon which relief can be granted. Id. at 1949 (citations and internal quotation marks omitted).

"When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement of relief." Id. at 1950. Plaintiffs must allege "plausible grounds to infer" that their claims rise "above the speculative level." Twombly, 550 U.S. at 555-56. "Determining whether a complaint states a plausible claim for relief" is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal, 129 S.Ct. at 1950.

2. Analysis

Lopatin argues that Plaintiff lacks standing because he has not produced evidence that he in fact lost $30 million and "the true source of the then invested funds is unquestionably in dispute, and of grave concern." (Mot. 3:21-22.)

In order to satisfy Article III's standing requirements, a plaintiff must show:

(1) it has suffered an injury in fact that is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the challenged action of the defendant; and (3) it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.

Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., Inc., 528 U.S. 167, 180-81 (2000) (internal quotation marks omitted). At the motion to dismiss stage, allegations are presumed to be correct, and thus "general factual allegations of injury resulting from the defendant's conduct may suffice" to establish the prerequisites for standing. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992).

Plaintiff has alleged that he invested in the Private Placement Project and that, as a result, he suffered a financial loss nearly equaling his $30 million investment. (SAC ¶¶ 22, 39.) At the motion to dismiss stage, these allegations are sufficient to establish Plaintiff's standing. Lujan, 504 U.S. at 561. Therefore, Lopatin's motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) is denied.

B. Motion to Dismiss for Improper Venue

1. Legal Standard

Where subject matter jurisdiction is based on diversity of citizenship, venue is proper in:

(1) a judicial district where any defendant resides, if all defendants reside in the same State, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is subject of the action is situated, or (3) a judicial district in which any defendant is subject to personal jurisdiction at the time the action is commenced, if there is no district in which the action may otherwise be brought.

28 U.S.C. § 1391(a). A motion to dismiss based on a forum selection clause is treated as a Rule 12(b)(3) motion to dismiss for improper venue. See Argueta v. Banco Mexicano, S.A., 87 F.3d 320, 324 (9th Cir. 1996). When considering a Rule 12(b)(3) motion, the district court need not accept the pleadings as true, Richards v. Lloyd's of London, 135 F.3d 1289, 1292 (9th Cir. 1998), and may consider facts outside of the pleadings, Argueta, 87 F.3d at 324. In the event of any material disputes of fact, the district court must draw all reasonable inferences in favor of the non-moving party. Murphy v. Schneider National, Inc., 362 F.3d 1133, 1140 (9th Cir. 2004) (internal quotations omitted).

2. Analysis

In connection with the alleged Ponzi scheme, Plaintiff and Land Base, LLC entered into a Private Enterprise Assets Exchange Benefits Participation Agreement (the "Land Base Agreement"). (Opp. Ex. A.) Article 5 of the Land Base Agreement provides that "[t]he Law of England and Wales shall be the proper Law . . . with exception of Article 4 that is to be governing [sic] by the Laws of District Columbia, USA [sic]." (Id.)

Lopatin appears to argue that this is a forum selection clause and that venue may only be laid in England. As an initial matter, the Court notes that Lopatin does not appear to be a party to the Land Base Agreement. Although he signed the Agreement, he did so in his representative capacity as an officer of Land Base, LLC, and not in his individual capacity. Therefore, the Court is not convinced that Lopatin has standing to enforce any purported forum selection clause contained within the Land Base Agreement.

However, even assuming arguendo that he has standing to enforce the terms of the Land Base Agreement, the clause at issue is a choice-of-law provision rather than a forum selection clause. See, e.g., 17 Am. Jur. 2D Contracts § 259 (defining a forum selection clause as one that "designates a particular state or court as the jurisdiction in which the parties will litigate disputes arising out of the contract"); id. § 261 (defining a choice-of-law provision as one that "names a particular state and provides that the substantial laws of that jurisdiction will be used to determine the validity and construction of the contract").

Aside from this choice-of-law provision, Lopatin has failed to articulate why venue is improper. The Court is satisfied that venue is properly laid in this judicial district either on the basis of 28 U.S.C. §1391(a)(2) or (a)(3). Therefore, Lopatin's Motion to Dismiss for Improper Venue is denied.

C. Motion to Compel Arbitration

1. Legal Standard

The Federal Arbitration Act embodies a federal policy in favor of arbitration, and any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration. Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 719 (9th Cir. 1999). The Federal Arbitration Act provides:

If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.

9 U.S.C. § 3. Under the FAA, the court's role "is therefore limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue." Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000).

2. Analysis

Article 4 of the Land Base Agreement, which contains terms relating to non-disclosure of confidential information, provides that "[a]ny controversy or claim arising out of or relating to this Transaction Code . . . regarding herein Article 4 Non-disclosures and / or non-circumvention, Good Faith which is not settled by the Parties, shall be subject to binding arbitration." (Id.)

For the reasons set forth above, the Court again notes that Lopatin may not enforce an purported arbitration agreement to which he is not a party. Britton v. Co-Op Banking Group, 916 F.2d 1405, 1413 (9th Cir. 1990) (holding that because the right to compel arbitration is contractual, "one who is not a party to a contract has no standing to compel arbitration").

In any event, however, the arbitration provision contained in the Land Base Agreement pertains only to disputes "regarding herein Article 4 Non-disclosures and/ or non-circumvention, Good Faith." (Opp. Ex. A, Art. IV.) Although broad arbitration clauses should be read expansively, "when an arbitration clause by its terms extends only to a specific type of dispute, . . . a court cannot require arbitration on claims that are not included." Simon v. Pfizer, 398 F.3d 765, 775 (6th Cir. 2005). The court must "look past the labels the parties attach to their claims to the underlying factual allegations and determine whether they fall within the scope of the arbitration clause." 3M Co. v. Amtex Security, Inc., 542 F.3d 1193, 1199 (8th Cir. 2008). The present lawsuit is not a dispute regarding disclosure of confidential information; rather, it is a case alleging that Lopatin and others conspired to defraud Plaintiff out of $30 million. Plaintiff's claims fall outside of the scope of the arbitration clause.

Therefore, because (1) it is not clear Lopatin has standing to enforce the terms of the Land Base Agreement in his individual capacity and (2) this case falls outside the scope of the arbitration clause, Lopatin's Motion to Compel Arbitration is denied.


For the foregoing reasons, Lopatin's motion to dismiss for failure to state a claim, motion to dismiss for improper venue, and motion to compel arbitration are DENIED.


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