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Arkan Hamana v. Sam Kholi

October 24, 2011


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


Defendants move to dismiss the third amended complaint ("TAC") [dock. #40]. Plaintiff moves to strike certain allegations in the counter-complaint [dock. #43]. For the reasons that follow, Defendants motion to dismiss is GRANTED in part and DENIED in part, and Plaintiff's motion to strike is DENIED.


Defendants move to dismiss Plaintiff's claims for usury, RICO violations, breach of contract, and intentional infliction of emotional distress.*fn1 Plaintiff asserts that Defendants are barred from attacking some of these claims because they failed to argue for dismissal in their earlier motion to dismiss. The Court does not find this position to be persuasive. Under Fed. R. Civ. P. 12(h)(2), a defense of failure to state a claim is not waived by the failure to raise it in a first motion. See Wilson-Combs v. Cal. Dep't of Consumer Affairs, 555 F. Supp. 2d 1110, 1113 n.3 (E.D. Cal. 2008). Under Fed. R. Civ. P. 12(g)(2), a defendant can move to dismiss an amended complaint for failure to state a claim based on arguments not raised in its first motion to dismiss. See id.; In re Harmonic, Inc., Sec. Litig., No. C 00-2287 PJH, 2006 U.S. Dist. LEXIS 90450, *39-40 (N.D. Cal. Dec. 11, 2006); see also CAL. PRACTICE GUIDE: FED. CIV. P. BEFORE TRIAL, §§ 9:18, 9:20 ("After [Plaintiff] amends, [Defendant] may move to dismiss the same cause of action or any other cause of action.") (emphasis in original). The Court addresses each challenged claim in turn.

A. Usury

Defendants seek dismissal of the usury claim on the ground that Defendants qualify for a statutory exemption from the usury law under Cal. Corp. Code § 25118(b). (Mem. at 8-10.) However, this statutory exemption does not apply to "[a]ny evidence of indebtedness issued or guaranteed . . . by an individual." § 25118(e)(1).

Here, Plaintiff pled that the loans at issue were made to him personally. (TAC ¶¶7-8.) Defendants, in their counterclaim, admit that these loans were made to Plaintiff personally. (Counterclaim ¶¶5-9.) Accordingly, the statutory exemption relied upon by Defendants is inapplicable to the loans alleged in the TAC.

Defendants, in their reply, do not pursue this argument further, and instead, for the first time, argue that the usury claim is not pled with particularity.*fn2 (Reply 2-4.) The Court does not address this argument. Zamani v. Carnes, 491 F.3d 990, 997 (9th Cir. 2007) ("The district court need not consider arguments raised for the first time in a reply brief.").

Defendants' motion to dismiss the usury claim is DENIED.

B. RICO Violations

Defendants challenge Plaintiff's RICO claim on multiple grounds. Several of Defendants' arguments can be disposed of quickly, as they are premised on an incorrect assumption that Plaintiff's RICO claim is based on a pattern of racketeering.

As an initial matter, Defendants' assertion that Plaintiff cannot plead a RICO claim based on the collection of unlawful debt (Mem. at 12) plainly lacks merit. This position is expressly contradicted by the text of the statute and is wholly unsupported by case law. See § 1962(a)-(c); Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1398 n.4 (9th Cir. 1986)("One of the essential elements a plaintiff must prove in a private RICO action under § 1962(a)-1962(d) is 'a pattern of racketeering activity' or the 'collection of an unlawful debt.'") (emphasis added).

Plaintiff's RICO claim for violation of 18 U.S.C. § 1962(a)-(d) is based on the collection of an unlawful debt. See TAC ¶¶98-101. Accordingly, Defendants' arguments regarding Plaintiff's failure to allege predicate acts "to support a claim that there was a 'pattern of racketeering activity'" (Mem. at 14-16) are inapposite. Similarly, Plaintiff need not allege that "predicate acts are related and amount to or pose a threat of continued activity" (Mem. at 16) in order to satisfy the definition of "collection of unlawful debt." See United States v. Giovanelli, 945 F.2d 479, 490 (2d Cir. 1991). "Unlike a 'pattern of racketeering activity' which requires proof of two or more predicate acts, to satisfy RICO's 'collection of unlawful debt' definition the government need only demonstrate a single collection." Id.; United States v. Weiner, 3 F.3d 17, 24 (1st Cir. 1993) (same); c.f. Religious Technology Center v. Wollersheim, 971 F.2d 364, 366 (9th Cir. 1992) (discussing the relatedness and continuity requirement as necessary to establish a pattern of racketeering activity).

In contrast, Defendants' arguments that Plaintiff failed to plead the existence of a RICO "enterprise" and failed to plead an effect on interstate commerce are relevant to RICO claims for collection of ...

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