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Arkan Hamana v. Sam Kholi

March 15, 2011


The opinion of the court was delivered by: Honorable Barry Ted Moskowitz United States District Judge


Pending before the court are Plaintiff's motion to voluntarily dismiss certain claims [dock # 18], Defendants Kholi's and Hallak's motions to dismiss certain claims [dock # 6, 9], and Kholi's motion to strike [dock. # 6]. For the reasons that follow, Plaintiff's motion to dismiss certain claims is GRANTED, Defendants motions to dismiss are GRANTED in part and DENIED in part, and Defendant Kholi's motion to strike is GRANTED.


Plaintiff moves to voluntarily dismiss ten of the seventeen claims brought in his First Amended Complaint ("FAC"). [Doc. # 18] Defendants oppose this motion on the ground that Plaintiff allegedly is seeking to avoid a dismissal with prejudice, as these ten claims are subject to Defendants' motion to dismiss. [Doc. # 24] Plaintiff, in reply, states that this motion is in line with his litigation strategy that focuses the case on core loan-sharking claims and agrees to dismiss with prejudice six of the ten claims that are "arguably duplicative" or "offer no additional remedy." [Doc. #26] Accordingly, causes of action numbers 4, 6, 9, 10, 11, and 16 are dismissed without prejudice.

Plaintiff may voluntarily dismiss without prejudice the remaining claims at issue. Defendants cite no case law to support their proposition that Plaintiff should be disallowed from voluntarily dismissing certain claims without prejudice while motions to dismiss are pending. Instead, Defendants assert that dismissal here would be inconsistent with Rule 15's "'underlying purpose of allowing amendments to facilitate a decision on the merits.'" [Doc. #24 (quoting 3 Moore's Fed. Prac. § 15.14[1] (3d ed. 2010))]

The Court disagrees. Defendants' position is premised on an assumption that if their motion to dismiss is successful, the claims at issue would be dismissed with prejudice. Only then would denying Plaintiff's motion result in final resolution of these claims. However, to the contrary, "[D]ismissal under Rule 12(b)(6) generally is not immediately final or on the merits because the district court normally will give the plaintiff leave to file an amended complaint to see if the shortcomings of the original document can be corrected." 5B Wright & Miller, Fed. Prac. & Proc. Civ. § 1357 (3d ed.) (citing numerous cases); see also Gompper v. VISX, Inc., 298 F.3d 893, 898 (9th Cir. 2002); ("Dismissal without leave to amend is improper unless it is clear . . . that the complaint could not be saved by any amendment.") Defendants make no showing that the causes of action that Plaintiff seeks to be dismissed without prejudice are fatally flawed, but rather argue that these causes of action are improperly pled.*fn1 Plaintiff, on the other hand, correctly argues that judicial economy would be improved by dismissing his business torts claims and duplicative loan sharking claims. Therefore, Plaintiff's motion to dismiss certain claims is GRANTED. Causes of action numbers 13, 14, 15, and 17 are dismissed without prejudice.


Following the voluntary dismissal of these claims, the only claims that remain subjectto Defendants' motions to dismiss are the second cause of action for RICO violations and the eighth cause of action brought under Bus. & Prof. Code § 17200, et seq. Defendants do not challenge causes of action numbers 1, 3, 5, 7, and 12.

A. Second Cause of Action (RICO Violations)

Plaintiff alleges the following predicate acts to support his claim that Defendants violated § 1962(a), (b), (c), and (d): (1) mail and wire fraud in violation of 18 U.S.C. §§ 1341 and 1343; (2) engaging in monetary transactions derived from unlawful activity in violation of 18 U.S.C. § 1957; (3) violation of 18 U.S.C. § 1952; and (4) "[e]ngaging in loan sharking, the charging of interest rates in excess of what is permitted by California law." (FAC ¶¶ 40, 43, 49)

None of these predicate acts are properly pled. The predicate act of mail or wire fraud must be pled with particularity pursuant to Fed. R. Civ. P. 9(b). Sanford v. MemberWorks, Inc., 625 F.3d 550, 558 (9th Cir. 2010); Lancaster Community Hosp. v. Antelope Valley Hosp. Dist., 940 F.2d 397, 405 (9th Cir. 1991). Plaintiff has failed to provide sufficient detail regarding the use of mail or wires to perpetrate fraud and thus has not alleged violations of sections 1341 and 1343 sufficient to constitute "racketeering activity" under § 1961(a). See Sanford, 625 F.3d at 558; Lancaster Community Hosp., 940 F.2d at 405. Plaintiff's § 1957(a) allegation merely parrots the text of the statute and is therefore insufficiently pled. See Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009); c.f. United States v. Dupre, 117 F.3d 810, 821 (5th Cir. 1997). Plaintiff's § 1952 reference is nothing more than a pro forma statutory citation; Plaintiff provides no supporting facts whatsoever. Finally, an allegation of charging interest rates in excess of what is permitted under state law, without more, does not constitute a RICO predicate. Thus, because the alleged predicate acts of "racketeering activity" asserted in the complaint fail, Plaintiff's second cause of action is DISMISSED without prejudice.*fn2

Defendants raise several arguments as to why dismissal should be with prejudice. None are persuasive at this time.

First, Defendants assert that the FAC negates the existence of damages to support RICO standing under 18 U.S.C. § 1964(c) because the amount of allegedly wrongful interest paid by Plaintiff ($480,800) is less than the amount of principal ($1,000,000) he received in loans from Defendant Kholi. (Kholi Mem. at 5-6; Hallak Mem. at 4-5) The parties do not cite -- and independent research did not uncover -- any case law directly addressing whether a civil RICO plaintiff can show cognizable injury under 18 U.S.C. § 1964(c) where he has obtained more money in principal than he has paid in unlawful interest at twice the usury rate.

However, if Plaintiff amends his complaint and reasserts RICO claims, the Court will not necessarily have to reach this issue. Plaintiff's complaint alleges that the loans at issue were secured by deeds of trust on Plaintiff's home and business and that on May 18, 2010, Defendant Kholi initiated foreclosure proceedings against these properties. (FAC ΒΆΒΆ 18, 20) If these properties are collectively valued at more than $520,000 ...

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