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Natalya Shuvalova and Elizabeth Shuvalova v. Joseph Richard Cunningham

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION


December 22, 2010

NATALYA SHUVALOVA AND ELIZABETH SHUVALOVA,
PLAINTIFFS,
v.
JOSEPH RICHARD CUNNINGHAM, DANIEL CUNNINGHAM, AND DOES 1-10, INCLUSIVE,
DEFENDANTS.

The opinion of the court was delivered by: Richard Seeborg United States District Judge

*E-Filed 12/22/2010*

United States District Court For the Northern District of California

ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS

I. INTRODUCTION

This case involves the unusual scenario of one spouse bringing claims against the other for alleged violations of the Trafficking Victims Protection Reauthorization Act (TVPRA). Natalya Shuvalova (Natalya) and her daughter Elizabeth Shuvalova (Liza) (collectively "plaintiffs") claim 23 that Joseph Cunningham (Joe) and his adult son Daniel Cunningham (Dan) (collectively "defendants") fraudulently lured them from Russia to the United States, induced Natalya to marry Joe, and then forced plaintiffs into involuntary servitude at Joe's rural property in Clearlake, California. For seven months, plaintiffs claim they were forced by defendants' alleged verbal and 27 physical threats to perform heavy, outdoor labor on the property. Based on these contentions, 28 plaintiffs' complaint raises eighteen claims for violations of the TVPRA, federal and state labor law, and state contract and tort law. Defendants move to dismiss the entire complaint under Rule 12(b)(6) for failure to state a claim. The Court heard oral argument on the motion on October 14, 2010. For the reasons stated below, defendants' motion is granted in part and denied in part.

II. BACKGROUND

Accepting the facts as presented in the complaint for purposes of this motion, Natalya and Joe met through a computer dating service in October 2005. At the time, Natalya lived in Russia and Joe lived then and now in Clearlake, California. They began a two-year relationship involving frequent emails and phone calls, as well as two vacations together each lasting two weeks. In daughter Liza. Natalya and Liza arrived in the United States in February 2008 and began living with Joe at the Clearlake property. Joe's thirty-five-year-old son, Dan, also lived at the house on the weekends. Natalya and Joe married on May 3, 2008.

Liza within weeks of their arrival. Joe threatened Natalya with serious physical harm including death. He asked Liza to help him "[get] rid of her mother." Joe threw furniture, plates, and cups at plaintiffs. He kept guns and large knives around the house, often grabbed them during his bouts of rage, and threatened plaintiffs with physical violence if they disobeyed him or told anyone about their situation. He enforced his threats by grabbing and violently shaking Natalya.

Plaintiffs were forced by Joe, with Dan's help, to engage in heavy, manual labor on the rural property. Natalya was locked out of the house and made "to move around earth, large rocks and 21 stones, [and] remove brush and debris." Natalya was forced to labor for eight to ten hours a day or more, usually seven days per week. She was not allowed to rest or drink water. Joe also forced Joe isolated plaintiffs from outside contact. He prevented them from leaving the house for most of the seven months they lived with him. Usually Natalya could only leave with Joe to attend October 2005,*fn1 Joe proposed to Natalya and promised to provide a loving home to her and her

According to the complaint, Joe began physically and verbally threatening both Natalya and Liza to engage in the same work for hours each day.

church and Liza could not leave the house at all until July 2008. Liza was not allowed to attend 2 school until mid-September 2008. Additionally, defendants prevented plaintiffs from having

Joe forced Liza to massage his naked body several times a week. He routinely talked to Liza explicitly about sex, even though she told him it made her uncomfortable. Joe also prevented Liza 6 from receiving treatment for an ear infection until it developed into an emergency. Instead, he 7 physically restrained her in order to force a homemade treatment into her ear. Dan also forced Liza 8 to engage in unwanted physical contact and made sexual references about her body. He routinely 9 grabbed, forcibly kissed, and fondled her. He would come into Liza's bedroom and remain without her consent while she was dressing and would enter the bathroom while she was showering. In September 2007, after seven months, plaintiffs were able to escape Joe's property and move to a 12 shelter in Sonoma County.

(1) the TVPRA, 18 U.S.C. §§ 1589, 1595; (2) the TVPRA, 18 U.S.C. §§ 1590, 1595; (3) invasion of 15 privacy; (4) false imprisonment; (5) fraud; (6) assault and battery; (7) the Fair Labor Standards Act 16 Labor Code §§ 551, 552 and California Code of Regulations § 11150; (11) California Labor Code § 18 970; (12) intentional fraud; (13) negligent misrepresentation; (14) conspiracy; (15) breach of oral 19 contract; (16) breach of the covenant of good faith and fair dealing; (17) intentional infliction of 20 emotional distress; and (18) negligent infliction of emotional distress. Defendants move to dismiss 21 all eighteen claims*fn2 for failure to state a claim upon which relief can be granted. 22 Under the Federal Rules of Civil Procedure, a complaint must present "a short and plain 24 statement of the claim" demonstrating that the plaintiff is entitled to relief. Fed. R. Civ. P. 8(a)(2). 25 If the complaint does not meet this standard, the defendant may move to dismiss for failure to state a 26 claim upon which relief may be granted. Fed. R. Civ. P. 12(b)(6). Dismissal is appropriate if the claimant either does not raise a cognizable legal theory or fails to allege sufficient facts to support a 2 cognizable claim. See Fed. R. Civ. P. 12(b)(6); Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988). While a legally sufficient complaint does not require "detailed factual 4 allegations," it must contain more than "unadorned" assertions of harm or bare legal conclusions 5 without factual support. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (citing Bell Atlantic Corp. 6 v. Twombly, 550 U.S. 544, 570 (2007)). Thus, a complaint must state a "plausible claim for relief" 7 to survive a motion to dismiss. Iqbal, 129 S. Ct. at 1950. In evaluating a Rule 12(b)(6) motion to 8 dismiss, all material allegations in the complaint are accepted as true and construed in the light most 9 favorable to the non-moving party. Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998).

Internet or phone access.

Based on defendants' alleged conduct, plaintiffs bring eighteen claims for damages under: (FLSA); (8) California Labor Code § 1197; (9) California Labor Code §§ 203, 204; (10) California 17

III. LEGAL STANDARD

Furthermore, Federal Rule of Civil Procedure 9(b) requires that "[in] allegations of fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." To 12 satisfy the rule, a plaintiff must plead the "who, what, where, when, and how" of the claimed 13 misconduct. Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997). Defendants must be provided 14 notice of "particular misconduct," such that they may "defend against the charge" beyond a general 15 denial of wrongdoing. Vess v. Ciba-Geigy Corp. U.S.A., 317 F.3d 1097, 1106 (9th Cir. 2003) 16

IV. DISCUSSION

(internal quotation marks and citations omitted).

A. TVPRA

the TVPRA.*fn3 See 18 U.S.C. §§ 1589, 1590. In claim one, they contend that Joe and Dan obtained 21 their services, in particular manual labor on the property, in violation of the TVPRA. Section 22 1589(a) proscribes a party from knowingly providing or obtaining the labor or services of a person 23 through force, physical restraint, serious harm to that person or another person, abuse of law or legal 24 process, or threat of any of those means. Section 1589(b) provides liability for one who knowingly 25 obtains financial benefit from the provision of such labor. 26 27

Plaintiffs' first two claims allege violations of the forced labor and trafficking provisions of obtained any "services," with respect to any "purported business" for any "economic goals." 3

Instead, they argue that plaintiffs' pleading establishes nothing more than that "common household 4 chores" were performed. The complaint, however, includes allegations that both Natalya and Liza 5 were forced to engage in "heavy, manual labor" for hours a day. Moreover, in their Reply to 6 plaintiffs' Opposition, defendants apparently accept that household labor falls within the scope of 7 the TVPRA, where a victim has been "promised compensation in exchange for promised labor." United States, plaintiffs fail to state a claim for forced labor under the TVPRA. There is no requirement under the statute, however, that a victim of forced labor be lured into the situation by a promise of employment. The statute merely proscribes knowingly providing or obtaining labor by 12 force or threat of serious harm. While defendants complain that plaintiffs have not cited any case 13 applying the TVPRA to married parties, there is no basis for the proposition that marriage 14 eliminates a tort claim, including one under the TVPRA. In this case, both Natalya and Liza aver 15 that they were confined to Joe's property and made to work through threat of serious harm. Thus, 16 plaintiffs have alleged sufficient facts to state a claim for forced labor against Joe. 17 1589 claim. According to the complaint, Joe forced plaintiffs to engage in heavy, manual labor 19

Defendants move to dismiss the claim on the grounds that plaintiffs fail to allege they

According to defendants, because they never offered compensation as a reason for coming to the

With respect to Dan, however, plaintiffs' factual allegations are insufficient to state a section "with Dan's help." Plaintiffs describe Dan as a "very large man" and argue that his "physical 20 presence" reminded them that they could not escape. In claim one, plaintiffs aver that both 21 defendants knowingly obtained services by force, threats, and intimidation. The complaint, 22 however, does not describe any acts by Dan beyond the general assertion that Joe engaged Dan's 23 help. Thus, plaintiffs' section 1589 claim against Dan is dismissed with leave to amend.

1590 establishes penalties for one who "knowingly recruits, harbors, transports, provides, or obtains 26 by any means, any person for labor or services in violation of this chapter." § 1590(a). In this case, 27 plaintiffs contend that Joe "promised to take care of" them in a "loving home" with Natalya as his 28 wife. While plaintiffs assert that Joe fraudulently induced them to immigrate to the United States, Plaintiffs' second claim alleges violation of the trafficking section of the TVPRA. Section

without more, the alleged misstatement is insufficient to state a claim for trafficking. Aside from 2 this conduct, the remaining allegations are directed to defendants' conduct once plaintiffs had 3 arrived at the property. In claim two, plaintiffs incorporate all factual allegations from claim one 4 and conclusorily assert that "defendants knowingly recruited, harbored, transported, provided, and 5 obtained" both Natalya and Liza for labor and sexual services. As pled, plaintiffs have not stated a 6 distinct claim for trafficking, as opposed to forced labor. Therefore, claim two is dismissed with 7 leave to amend. 8

In claim seven, plaintiffs allege that defendants violated the FLSA. In particular, they claim they were denied minimum wage as required by law. See 29 U.S.C. § 206(a) (establishing the minimum wage to be paid by "[e]very employer" to each of his "employees" engaged in 12 commerce.) Although plaintiffs contend that they were "employed," they also admit in their 13 Opposition that "the facts of this case do not demonstrate the classic employer-employee 14 relationship." Instead, plaintiffs allege that Joe was an "employer" under the FLSA and California 15

Additionally, plaintiffs argue that they meet the "standards" of the TVPRA and therefore urge the 17

Thus, while plaintiffs plead a separate FLSA claim, their complaint raises two distinct issues: (1) 19 whether the FLSA provides a measure of damages for TVPRA violations; and (2) whether plaintiffs 20 can maintain a FLSA claim independent of their causes of action under that statute. 21

On the first issue, section 1593 of the TVPRA expressly provides that victims shall be 22 compensated, at a minimum, for the value of their services and labor "as guaranteed under the 23 minimum wage and overtime guarantees of the Fair Labor Standards Act." 18 U.S.C. § 1593(b)(3).

Accordingly, courts have relied on the FLSA's provisions to calculate restitution for TVPRA 25 violations. See, e.g., United States v. Sabhnani, 599 F.3d 215, 254-57 (2d Cir. 2010) (reviewing 26 district court's calculation of award after criminal conviction under the TVPRA). In a recent 27 decision, relied on by plaintiffs, the court entered default judgment against the defendant on 28 numerous claims including those for TVPRA, FLSA, and California Labor Code violations. Pena

B. FLSA 9

Labor Code because of the "fraudulent nature of [p]laintiffs' living at [the Clearlake] property." 16

Court to "award damages based on standard wage and hour violations under state and federal law." 18

Canal v. de la Rosa Dann, No. 09-03366 CW, 2010 U.S. Dist. LEXIS 97856 (N.D. Cal. Sept. 2, 2 2010). The court's award of compensatory damages included the value of the plaintiff's wages, 3 including applicable penalties available under the California Labor Code. Id. at *10. While the 4 court entered default judgment on both the TVPRA and labor code claims, it declined the plaintiff's 5 separate request for an equal amount as restitution, stating that it would constitute a double award. 6

Id. In similar fashion, plaintiffs in this case may rely on the FLSA as a measure of damages for the 7 alleged TVPRA violations. their forced labor allegations, they fail to state a claim.*fn4 Plaintiffs contend that Joe was an "employer" because he fraudulently lured them into living at the Clearlake property. Although Joe and Natalya married, plaintiffs argue in their Opposition that she and her daughter were "not in a 12 true familial relationship with Joe," because of this fraud. Thus, plaintiffs apparently seek 13 application of the FLSA based on whether labor was "truly" performed for the family or not. 14

Plaintiffs advance no authority, however, for the proposition that fraud is a sufficient basis for 15 finding an employer-employee relationship among household members under the FLSA. 16

For example, plaintiffs argue that they fall under the definition of domestic service employee, 18 because they labored, not for any "family" benefit, but involuntarily as a result of threats by Joe and TVPRA. To the extent claim seven alleges violation of the FLSA based on the contention that 21 plaintiffs were fraudulently induced into a family relationship, the claim is dismissed without leave 22 to amend.

On the second issue, to the extent plaintiffs seek to maintain an FLSA claim independent of

In the end, plaintiffs' putative FLSA claim appears grounded on allegations of forced labor.

Dan. Where their claim is based on allegations of forced labor, they may state it directly under the 20

C. California Labor Code 2

Plaintiffs allege multiple claims arising under the California Labor Code including: failure to 3 pay minimum wage and overtime (claim eight); failure to pay wages on time (claim nine); failure to 4 provide days of rest (claim ten); and knowingly false representations made to induce plaintiffs to 5 move to California for employment (claim eleven). These claims and those discussed above under 6 the FLSA raise similar issues. In their Opposition, plaintiffs argue that California law "is identical 7 to federal law" in its definition of "employ" and is "essentially identical" in its recognition of 8 "household occupations" as encompassed by the California Labor Code. As before, the problem is 9 that plaintiffs fail to advance a theory for finding an employer-employee relationship between household members on the grounds that Natalya was induced to enter the marriage fraudulently. In short, the California Labor Code may provide a basis for calculating the value of plaintiffs' labor 12 under their TVPRA claims. As independent claims, however, claims eight through eleven must be 13 dismissed without leave to amend. 14

D. Fraud and Misrepresentation 15

Plaintiffs bring three separate claims for fraud and misrepresentation involving statements 16 allegedly made either by Joe or by both defendants on which plaintiffs contend they relied in 17 deciding to immigrate to the United States. In their fifth claim, plaintiffs allege fraud against Joe for 18 intentional and/or negligent misrepresentation "in telling Natalya that he would provide a loving, 19 supportive home for her and her daughter." In claim twelve, plaintiffs aver intentional fraud against 20 Joe for knowingly false representations including telling plaintiffs "they would be cared for in a 21 loving and safe relationship." Plaintiffs' thirteenth claim raises negligent misrepresentation against 22 all defendants for statements including that "they would be properly cared for in a loving and 23 supporting family, in accordance with the laws of the United States." 24

In California, a plaintiff averring fraud must plead five elements: (1) a false statement; (2) 25 knowledge of falsity; (3) intent to induce reliance; (4) justifiable reliance; and (5) resulting damage. 26

See Robinson Helicopter Co., Inc. v. Dana Corp., 34 Cal. 4th 979, 990 (2004). In claim five, 27 plaintiffs allege that Joe made statements he knew were false and/or lacked reasonable grounds for 28 believing them to be true. Since the defendant's knowledge of falsity is an element of fraud, no claim for "negligent" fraud exists. Thus, in that claims five and twelve represent the same fraud 2 claim against Joe, claim five is dismissed without leave to amend as duplicative. 3 4 may not know to be false but has no reasonable grounds for believing to be true. See Lincoln 5 181 Cal. App. 3d 954, 962 (1986)). The misrepresentation, however, must relate to a statement of 7 "past or existing material fact." Id. In other words, promises of future conduct, such as providing a 8 loving home, do not give rise to a misrepresentation claim. Plaintiffs also aver generally that 9 defendants continued to make negligent misrepresentations "throughout the course of [their] ordeal." Their only allegation of reliance, however, is that defendants' misrepresentations affected their earlier decision to leave their home country. Therefore, claim thirteen is dismissed with leave 12 to amend. 13

Joe. In claim twelve, plaintiffs contend that Joe made fraudulent statements to Natalya "in or about 15 States." The statements included telling Natalya and Liza that they would be cared for in a loving 17 relationship. According to plaintiffs, these representations were made by Joe as part of a fraudulent 18 scheme to exploit their labor. Pursuant to Rule 9(b), plaintiffs must aver circumstances of the 19 alleged fraud with particularity. Even under Rule 8, whether plaintiffs' allegations are sufficient to 20 state a claim is a context-specific inquiry. See Iqbal, 129 S. Ct. at 150. According to the complaint, 21 in the time after the alleged fraudulent statements, Joe and Natalya engaged in a phone and email 22 relationship over two years, vacationed together, and married each other in 2008. As discussed 23 above, plaintiffs' complaint includes sufficient allegations to state a claim that Joe forced them to 24 engage in labor on his property in 2008. Those contentions alone, however, do not support the 25 inference that statements by Joe in 2005 were made with the intent to obtain forced labor. Thus, 26 plaintiffs' claim fifteen for fraud is dismissed with leave to amend. 27 28

Unlike fraud, a claim for misrepresentation may be based on a statement that the defendant Alameda Creek v. Cooper Indus., 829 F. Supp. 325, 330 (N.D. Cal. 1992) (citing Fox v. Pollack, 6

The remaining question is whether plaintiffs' complaint properly states a fraud claim against

October 2005 about the circumstances and the lawfulness of her emigration [sic] to the United 16

E. Breach of Contract and Breach of the Covenant of Good Faith and Fair Dealing sixteen they contend that Joe breached the covenant of good faith and fair dealing. As a threshold 4 matter, plaintiffs must plead the existence of a contract. In California, the essential elements of a 5 contract are: (1) parties capable of contracting; (2) consent; (3) a lawful object; and (4) sufficient 6 consideration. Cal. Civ. Code § 1550. Consent to enter a contract requires the parties' mutual 7 assent to "a sufficiently definite set of terms to constitute an enforceable contract." Netbula, LLC v. 8 Bindview Development Corp., 516 F. Supp 2d 1137 (N.D. Cal. 2007). In this case, plaintiffs' only 9 contention apparently directed to contract formation is "[d]efendants agreed that Plaintiffs would be provided care in a loving and supportive relationship." Plaintiffs also aver they performed "each and every condition, covenant, and promise and obligation required on their part," without 12 providing any indication as to what those terms were. These contentions are insufficient to establish 13 a plausible basis for the existence of an enforceable contract. Therefore, claims fifteen and sixteen 14 are dismissed with leave to amend.*fn5 15

In claim fourteen, plaintiffs seek to establish defendants were engaged in a civil conspiracy.

Conspiracy is "a legal doctrine that imposes liability on persons who, although not actually 18 committing a tort themselves, share with the immediate tortfeasors a common plan or design in its 19 perpetration." Applied Equipment Corp. v. Litton Saudi Arabia Ltd., 7 Cal. 4th 503, 510-511 20 (1994). The elements of a conspiracy claim are: (1) formation and operation of the conspiracy; (2) 21 wrongful conduct in furtherance of the conspiracy; and (3) resulting damage. Id. at 511. In order to 22 establish the formation of a conspiracy, a plaintiff must demonstrate that the defendants had actual 23 knowledge of, and the intent to aid, the planned tort. See Kidron v. Movie Acquisition Corp., 40

In claim fifteen, plaintiffs allege breach of oral contract against all defendants and in claim

F. Conspiracy

Cal. App. 4th 1571, 1582 (1995). While knowledge and intent may be inferred from circumstances 2 including the nature of the acts committed and the relationship and interests of the alleged 3 coconspirators, association alone is insufficient. Id. (citations omitted). "There must be evidence of 4 some participation or interest in the commission of the offense." Id. (internal quotations and citation 5 omitted). 6

7 must first establish the formation of a conspiracy. Plaintiffs, however, merely state in conclusory 8 fashion that Joe and Dan "willfully conspired" in or around October 2005 fraudulently to induce 9 them to immigrate and to deny them rights under United States law. As discussed above, plaintiffs fail to state a claim that Joe was engaged in a fraudulent scheme in 2005. Moreover, there are simply no facts averred reflecting that Dan knew of any fraud or intended to aid it in 2005. Finally, 12 while plaintiffs also allege acts in furtherance of an ongoing conspiracy, they fail to make specific 13 allegations against Dan and Joe individually, as opposed to "defendants" collectively. For example, 14 they contend that defendants "repeatedly threatened physical harm, death threats [sic] and 15 deportation." Although the complaint contains numerous allegations that Joe threatened Natalya 16 and Liza, prior to claim fourteen there are no averments that Dan made any such threats. In short, 17 plaintiffs cannot plead the existence of a conspiracy through general allegations that already group 18 both defendants' conduct together. Accordingly, the conspiracy claim is dismissed with leave to 19 amend. 20

Plaintiffs also raise several other common law tort claims against the defendants collectively, 22 including: invasion of privacy (claim three); false imprisonment (claim four); assault and battery 23 (claim six); intentional infliction of emotional distress (claim seventeen); and negligent infliction of 24 emotional distress (claim eighteen). The complaint may contain sufficient factual allegations to 25 state many of these tort claims, particularly with respect to Joe's conduct toward both Natalya and 26 Liza. As pled, however, each of the claims avers that the defendants collectively committed these 27 torts against the plaintiffs collectively. The claims cannot be maintained in this fashion. In order 28 for each defendant to answer the complaint in good faith and without prejudice, he must be given

While plaintiffs may seek to hold Dan liable for the conduct of Joe, and vice versa, they

G. Additional Tort Claims

notice of the specific conduct for which each plaintiff seeks to hold him liable. Accordingly, claims 2 three, four, six, seventeen, and eighteen are dismissed with leave to amend. 3

V. CONCLUSION

Defendants' motion to dismiss the TVPRA section 1589 claim is denied for the claim against Joe and granted with leave to amend the claim against Dan. The TVPRA section 1590 claim 6 is dismissed with leave to amend. Plaintiffs may rely on the FLSA and the California Labor Code in 7 arguing the value of their labor, if they prevail on their TVPRA claims, but their FLSA and California Labor Code claims may not proceed as stand-alone causes of action premised on 9 fraudulent inducement to marry, so defendants' motion to dismiss claims for relief seven through eleven is granted without leave to amend. Plaintiffs' claim for "negligent" fraud is dismissed without leave to amend. The remaining claims for fraud, misrepresentation, breach of contract, 12 breach of the covenant of good faith and fair dealing, conspiracy, invasion of privacy, false 13 imprisonment, assault and battery, intentional infliction of emotional distress, and negligent 14 infliction of emotional distress are all dismissed with leave to amend. Plaintiffs must file any 15 amended complaint within 20 days from the date of this order. 16 17

IT IS SO ORDERED.


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