The opinion of the court was delivered by: The Honorable A. Howard Matz, U.S. District Judge
Present: The Honorable A. HOWARD MATZ, U.S. DISTRICT JUDGE
Stephen Montes Not Reported
Deputy Clerk Court Reporter / Recorder Tape No. Attorneys NOT Present for Plaintiffs: Attorneys NOT Present for Defendants:
Proceedings: IN CHAMBERS (No Proceedings Held)
Before this Court is the Motion to Dismiss of Defendants Aeuhi Gomer ("Gomer"), Yong Sam Chang a/k/a Michael Chang ("Sam Chang"), and Sung Hui Kim ("Kim").*fn1 Defendants Donna White ("White") and Albert Siedman ("Siedman") have joined in the Motion. Dkt. 23, 25. For the following reasons, the Court DENIES the Motion.*fn2
Plaintiff is the Estate of David R. Foster ("Estate"), by its executor Sarah Foster. David R. Foster ("Foster") died on June 4, 2010, and at the time of his death, his estate "was worth as much as $20 million." Compl. ¶ 1. The estate is being probated in Riverside Superior Court. Id.
Foster was married three times. Compl. ¶ 4. His first marriage ended in divorce and did not result in any issue. Id. His second marriage was to Patricia Anne Foster in 1955, with whom he had two daughters: Sarah Foster (the executor of the Estate) and Victoria Foster. Id. Patricia Foster died in June 1994. Id. Foster's third marriage was in 1996 to Alexandra Chang, the sister of Defendants Gomer, Sam Chang, and Kim.
Compl. ¶¶ 5-6, 9-10. Foster was 76 years old at the time of his third marriage. Compl. ¶ 5. This marriage produced no issue. Id. Alexandra Chang predeceased Foster. Compl. ¶ 5. Foster was then 88 years old and suffering from dementia and other ailments. Id.
Foster's estate consisted primarily of the Foster Family Trust, which was formed by Foster and his second wife Patricia Foster, and which was divided into three sub-trusts upon Patricia Foster's death: the Survivor's Trust, the Marital Trust, and the Credit Trust. Compl. ¶¶ 14-15. During his life, Foster was entitled to the income from each of these three trusts, as well as the principal from the Survivor's Trust. Compl. ¶ 16. He also had the power to alter, amend, or revoke the Survivor's Trust. Id. Foster's premarital agreement with Alexandra Chang, his third wife, created the David and Alexandra Foster Trust ("DAFT"), and required that it be funded with Foster's Rancho Mirage Residence, $100,000, and 25,000 shares of Colgate-Palmolive stock (Foster previously served as the CEO of Colgate-Palmolive and the chairman of the Board of Directors of the company). Compl. ¶¶ 3, 19. The Premarital Agreement stated that in the event of the death of Foster or Alexandra Chang, the surviving spouse would be entitled to the contents of the DAFT. Compl. ¶ 19. Foster served as trustee and Alexandra Chang as successor trustee. Id. Alexandra Chang predeceased Foster. Compl. ¶5. Upon her death, "Gomer became the self-appointed and sole caregiver to Foster." Compl. ¶6.
The 96-page Complaint largely consists of detailed allegations that Alexandra Chang (by then deceased), together with her siblings Gomer, Sam Chang, and Kim, Alexandra's attorney Donna White, and Albert Siedman, Foster's temporary caretaker for a period of six months in Nantucket, conspired to defraud Foster of his money and property while his health and mental facilities were deteriorating. This alleged scheme included modifying the David and Alexandra Foster Trust to advantage Alexandra Chang and her siblings (Compl. ¶¶ 31, 41), and lying to Foster about the loyalty of his daughters, his health, and his financial status in order to manipulate his financial behavior. See, e.g., Compl. ¶¶ 77-87. Some of these allegations are discussed in further detail in the corresponding sections below. They include that in May 2008 "Gomer and White [the attorney] caused Foster to execute a will, trust and various trust amendments that effectively installed Gomer as Foster's fiduciary and named Gomer as sole beneficiary of almost the entirety of Foster's estate." Compl. ¶ 82. Ultimately, however, after court proceedings in Rhode Island, the Nantucket Probate Court struck provisions from this will and trust. The next month, attorney White "renounced the $200,000 in bequests to her daughters" that those 2008 instruments had provided. Complaint, ¶ 154.
Plaintiff brings eleven causes of action against Defendants: (1) violation of the Racketeer Influenced and Corrupt Organization ("RICO"), 18 U.S.C. § 1962(c) against Gomer; (2) violation of RICO against White; (3) RICO conspiracy, 18 U.S.C. § 1962(d) against White; (4) RICO conspiracy against Siedman; (5) RICO conspiracy against Sam Chang and Kim; (6) elder abuse against all Defendants; (7) breach of fiduciary duty against Gomer, White, and Siedman; (8) constructive fraud against Gomer, White, and Siedman; (9) fraud against all Defendants; (10) conversion against Gomer and Sam Chang; and (11) unjust enrichment against all Defendants. Plaintiff filed this Complaint in federal court on the basis of federal question and diversity jurisdiction. Plaintiff seeks actual damages, prejudgment interest, treble damages under 18 U.S.C. § 1964(c), costs, and attorneys' fees. Prayer for Relief.
Defendants bring this Motion to dismiss Plaintiff's first and fifth causes of action, for RICO violations and for RICO conspiracy respectively. The first cause of action is asserted against Gomer, while the fifth cause of action is against Sam Chang and Kim.
A complaint may be dismissed for failure to state a claim upon which relief can be granted. See Fed. R. Civ. P. 12(b)(6). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.' A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, - U.S. -, 129 S.Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 570). "[A] plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Twombly, 550 U.S. at 555 (internal quotation marks and ellipsis omitted).
The plausibility standard articulated in Twombly and Iqbal, requires that a complaint plead facts demonstrating "more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief." Iqbal, 129 S.Ct. at 1949 (internal quotation marks and citation omitted). 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. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct," the complaint has not shown that the pleader is entitled to relief. Iqbal, 129 S.Ct. at 1950 (internal citation, alteration, and quotation marks omitted); see Moss v. U.S. Secret Service, 572 F.3d 962, 969 (9th Cir. 2009) ("[F]or a complaint to survive a motion to dismiss, the non-conclusory 'factual content,' and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the pleader to relief.") (citing Iqbal, 129 S.Ct. at 1949).
To determine whether a complaint states a claim sufficient to withstand dismissal, a court considers the contents of the complaint and its attached exhibits, documents incorporated into the complaint by reference, and matters properly subject to judicial notice. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322-323 (2007); Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001). The court must accept as true all factual allegations contained in the complaint. That principle, however, "is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 129 S.Ct. at Where a motion to dismiss is granted, a district court should provide leave to amend unless it is clear that the complaint could not be saved by any amendment. Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008) (citation omitted).
Defendants contend that Plaintiff has not alleged sufficient predicate acts to support the RICO claims, and that the Complaint "fails to allege continuing threats of racketeering activity warranting treble damages." Mot. at 3-4. Defendants claim that because Plaintiff has failed to allege actionable RICO claims under 18 U.S.C. § 1962(c), Plaintiff has also failed to state a claim under 18 U.S.C. § 1962(d) for conspiracy, as Section 1962(d) makes it "unlawful for any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section." Mot. at 23.
To state a cause of action under RICO, 18 U.S.C. § 1962(c), a plaintiff must allege (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity (known as "predicate acts") (5) causing injury to plaintiff's business or property. Living Designs, ...