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Comercializadora Recmaq Limitada v. Hollywood Auto Mall, LLC

United States District Court, Ninth Circuit

May 20, 2013

COMERCIALIZADORA RECMAQ LIMITADA, Plaintiff,
v.
HOLLYWOOD AUTO MALL, LLC, a California limited liability company dba HOLLYWOOD MOTORS; MOHAMAD REZA GHASEMI, an individual; and JAIME SOTOMAYOR, an individual Defendants.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT MOHAMAD REZA GHASEMI'S MOTION TO DISMISS PLAINTIFF'S FIRST AMENDED COMPLAINT (Doc. No. 38)

ANTHONY J. BATTAGLIA, District Judge.

Presently before the Court is Defendant Mohamed Ghasemi's ("Ghasemi") motion to dismiss, (Doc. No. 38), Plaintiff Comercializadora Recmaq Limitada's ("Recmaq") first amended complaint ("FAC"), (Doc. No. 35). Recmaq filed an opposition on May 1, 2013. (Doc. No. 41.) As of the date of this order, Ghasemi, who is proceeding pro se, has not filed a reply. Pursuant to Civil Local Rule 7.1.d.1, the Court finds the motion suitable for determination on the papers and without oral argument. Accordingly, the motion hearing set for June 6, 2013, is hereby vacated. For the reasons set forth below, Ghasemi's motion to dismiss the FAC is GRANTED IN PART AND DENIED IN PART. Recmaq is granted limited leave to amend the FAC in compliance with this order. No new claims or parties may be added without leave of court.

BACKGROUND

I. Factual Background

This case involves an alleged oral contract entered into in 2002, by and between Recmaq and Defendants Hollywood Auto Mall, LLC ("Hollywood Auto Mall"), Ghasemi, and Jamie Sotomayor ("Sotomayor") (collectively, "Defendants").[1] (FAC §11.) Pursuant to the oral contract, Defendants agreed to locate heavy machinery for sale at auctions in the United States, and advise Recmaq of the availability, condition, and specifications of the machinery. ( Id. at § 11.) Upon further instruction by Recmaq, Defendants, through Sotomayor and Ghasemi, would then purchase the machinery for the benefit and on behalf of Recmaq. ( Id. at §§ 19, 20.)

The FAC further alleges that pursuant to the oral contract, when Sotomayor and Ghasemi located a piece of machinery for Recmaq, Sotomayor was instructed to contact Recmaq to determine if Recmaq wished to submit a bid for the machinery at the auction. ( Id. at §20.) In the event Recmaq wished to bid on the machinery, the FAC alleges that Sotomayor represented that Recmaq was required to deposit earnest money with the auctioneers in order to prove that Recmaq was capable of purchasing the machinery. ( Id. at § 21.) If the machinery was successfully purchased, the earnest money was subtracted from the purchase price. ( Id. ) Sotomayor would then transmit an invoice to Recmaq for the remaining balance owed to the auctioneer or seller, whereby Recmaq would then transfer the appropriate funds via wire transfer to Sotomayor and Ghasemi, who would then pay the balance due the auctioneer. ( Id. at 22.) If the machinery was not purchased, the earnest money was returned to Sotomayor and Ghasemi and held on account for Recmaq. ( Id. ) The FAC also alleges that for each piece of equipment purchased by Recmaq, Sotomayor and Ghasemi received an undisclosed commission. ( Id. at 25.)

In or around August 2005, the FAC alleges that Drago Gluscevic ("Gluscevic"), Recmaq's owner, visited both Sotomayor and Ghasemi at a location Ghasemi described as his personal residence. ( Id. at 27.) At these meetings, Recmaq alleges that Gluscevic spoke with both Sotomayor and Ghasemi about bidding on machinery at auctions and future business opportunities between the parties. ( Id. ) At one or both of these meetings, the FAC alleges that Ghasemi showed Gluscevic how Ghasemi specifically bid on the machinery at auctions. ( Id. ) After the August 2005 meetings, the FAC alleges that Gluscevic spoke directly with Ghasemi over the telephone regarding their business relationship. ( Id. at 28.)

The FAC then alleges that there were multiple occasions in which Recmaq transferred money to Sotomayor and Ghasemi for the purchase of machinery, but that Recmaq never received the machinery or a return of the previously transferred funds. ( Id. at §§ 29-36.) For example, the FAC alleges that on or around December 31, 2009, Recmaq transferred $338, 400.00 to Sotomayor and Ghasemi for the purchase of eight Caterpillar "backhoe loaders, " but that Defendants have neither delivered the machinery or returned the transferred funds. ( Id. at § 29.) Thereafter, on or around March 3, 2010, the FAC alleges that Recmaq transferred an additional $139, 500.00 to Sotomayor and Ghasemi for the future purchase of three Caterpillar "420 E 2008, " but that Defendants have neither delivered the machinery or returned the transferred funds. ( Id. at § 30.) The FAC alleges that before Recmaq transferred the additional $139, 500.00 to Sotomayor and Ghasemi in March 2010, Sotomayor informed Recmaq that the eight Caterpillar "back-hoe loaders, " which had yet to be delivered to Recmaq, would either be delivered to Recmaq, or the $338, 400.00 in transferred funds would be returned to Recmaq no later than June 2010. ( Id. at 29.) Recmaq never received either the machinery or the funds. ( Id. )

In addition to the funds listed above, the FAC alleges that Recmaq transferred $240, 000.00 to Sotomayor and Ghasemi to be held on account for deposit as earnest money at four different auctions, and that Recmaq transferred an additional $381, 100.00 to Sotomayor and Ghasemi for the purchase of heavy machinery at various dealers.[2] ( Id. at §§ 31, 32.) The FAC also alleges that Sotomayor falsely told Recmaq that $60, 000.00 was required in order to qualify as a bidder at these auctions, when in fact, Recmaq later discovered that only $10, 000.00 was required. ( Id. at § 31.) To date however, Defen-dants have not delivered any of the machinery as promised, nor have Defendants returned any portion of the funds transferred to Defendants for the purchase of such machinery. ( Id. at §§ 29-32.) As a result, Recmaq alleges it has transferred $1, 099, 000.00 to Sotomayor and Ghasemi, but has not received any equipment or a return of such funds. ( Id. at § 33.)

On or about January 12, 2011, Frank Keller ("Keller"), an attorney retained by Recmaq, met with Sotomayor at the office of Hollywood Auto Mall, which is located at 1423 Broadway, El Cajon, California 92021. ( Id. at § 34.) The FAC alleges that the purpose of this meeting was to discuss repayment of the debt Sotomayor and Ghasemi owed to Recmaq. ( Id. ) At the January 12, 2011 meeting, the FAC alleges that Sotomayor admitted to Keller that he and Ghasemi owed money to Recmaq, and that Ghasemi, his former business partner, had defrauded both him and Recmaq by stealing funds from Hollywood Auto Mall, including the funds Recmaq had transferred to Defendants. ( Id. ) On January 17, 2011 Sotomayor provided Keller a written statement, which is attached to the FAC as Exhibit A (Spanish) and Exhibit B (English translation). ( Id. at Exs. A, B.)

II. Procedural History

On April 17, 2012, Recmaq filed a complaint against Defendants alleging fifteen causes of action, including: (1) fraud; (2) conspiracy to commit fraud; (3) breach of contract; (4) RICO violation, 18 U.S.C. 1962(c); (5) RICO conspiracy, 18 U.S.C. 1962(d); (6) conversion; (7) unfair business practices under California's Unfair Competi-tion Law ("UCL"); (8) intentional interference with prospective economic advantage; (9) breach of the implied covenant of good faith and fair dealing; (10) breach of fiduciary duty; (11) unjust enrichment; (12) account stated; (13) debt; (14) money lent; and (15) money paid. (Doc. No. 1.) On July 12, 2012, the clerk entered default against Holly-wood Auto Mall and Sotomayor. (Doc. No. 9.) The Clerk did not enter default against Ghasemi at this time because Recmaq had failed to effectuate service of the summons and complaint on Ghasemi.

After Ghasemi failed to timely respond to the complaint, the Clerk entered default against Ghasemi on November 13, 2012. (Doc. No. 18.) On November 14, 2012, Ghasemi filed a motion to dismiss the complaint, which was rejected by the Court as untimely. (Doc. No. 19.) On November 26, 2012, Recmaq filed a motion for default judgment against all three Defendants. (Doc. No. 20.) On December 14, 2012, Ghasemi filed a motion to set aside the entry of default, (Doc. No. 23), which was granted by the Court on February 6, 2013, (Doc. No. 31). Ghasemi then filed a motion to dismiss the complaint, (Doc. No. 33), which was vacated as moot after Recmaq filed the FAC, (Doc. No. 37). On April 10, 2013, Ghasemi filed the instant motion to dismiss. (Doc. No. 38.)

LEGAL STANDARD

A motion to dismiss a complaint under Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of the claims asserted in the complaint. Navarro v. Black, 250 F.3d 729, 732 (9th Cir. 2001). Rule 8(a)(2) requires that a pleading stating a claim for relief contain "a short and plain statement of the claim showing that the pleader is entitled to relief." The function of this pleading requirement is to "give the defendant fair notice of what the... claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, 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." Id. A complaint does not "suffice if it tenders naked assertions devoid of further factual enhancement." Ashcroft v. Iqbal, 556 U.S. 662, 667, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). "Factual allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. "All allegations of material fact are taken as true and construed in the light most favorable to plaintiff. However, conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss for failure to state a claim." Epstein v. Wash. Energy Co., 83 F.3d 1136, 1140 (9th Cir. 1996); see also Twombly, 550 U.S. at 555.

DISCUSSION

The FAC alleges the same fifteen causes of action alleged in the original com-plaint: (1) fraud; (2) conspiracy to commit fraud; (3) breach of contract; (4) RICO violation, 18 U.S.C. § 1962(c); (5) RICO conspiracy, 18 U.S.C. § 1962(d); (6) conver-sion; (7) unfair business practices under the UCL; (8) intentional interference with prospective economic advantage; (9) breach of the implied covenant of good faith and fair dealing; (10) breach of fiduciary duty; (11) unjust enrichment; (12) account stated; (13) debt; (14) money lent; and (15) money paid. (Doc. No. 35.) The Court addresses each in turn.

I. Fraud and Conspiracy to Commit Fraud

Recmaq's first and second causes of action allege fraud and conspiracy to commit fraud. (FAC §§ 37-55.) To successfully plead a cause of action for fraud, a plaintiff must show: (1) a false representation; (2) knowledge of its falsity; (3) intent to defraud; (4) justifiable reliance; and (5) damages. Moore v. Brewster, 96 F.3d 1240, 1245 (9th Cir. 1996) (quotations omitted). Pursuant to Federal Rule of Civil Procedure 9(b), "[i]n all averments of fraud... the circumstances constituting fraud... shall be stated with particularity." Fed.R.Civ.P. 9(b). The intention of Rule 9(b) is to give the defendant notice of the particular misconduct so that the defendant can defend against it. Bly-Magee v. Cal., 236 F.3d 1014, 1019 (9th Cir. 2001) (citing Neubronner v. Milken, 6 F.3d 666, 672 (9th Cir. 1993)). Therefore, pursuant to Rule 9(b), a plaintiff must plead the time, place, and nature of the actions, in addition to why the actions are false. Decker v. Glenfed, Inc. ( In re Glenfed, Inc., Sec. Litig. ), 42 F.3d 1541, 1548 (9th Cir. 1994).

To state a claim for conspiracy to commit fraud a plaintiff must allege sufficient facts to state a claim for both fraud and civil conspiracy. Del E. Webb Corp. v. Structural Materials Co., 123 Cal.App.3d 593, 603 n.4, 176 Cal.Rptr. 824 (Cal.Ct.App. 1981) ("A conspiracy to commit fraud is not itself a tort and such conduct is not actionable unless a fraud is in fact committed."). California law provides that to state a cause of action for civil conspiracy the plaintiff must allege: (1) formation and operation of the conspiracy; (2) wrongful conduct in furtherance of the conspiracy; and (3) damage resulting from such wrongful conduct. Wasco Prods. v. Southwall Techs., 435 F.3d 989, 992 (9th Cir. 2006); Cellular Plus, Inc. v. Super. Ct., 14 Cal.App.4th 1224, 1236, 18 Cal.Rptr.2d 308 (Cal.Ct.App. 1993). Moreover, because conspiracy is a legal doctrine used to establish joint and vicarious liability by the conspirators for an underlying tort, Entm't Research Gp. v. Genesis Creative Gp., 122 F.3d 1211, 1228 (9th Cir. 1997), each member of the conspiracy must be able to commit the underlying tort, and all the elements of that tort must be satisfied, Applied Equip. Corp. v. Lipton Saudi Arabia Ltd., 7 Cal.4th 503, 511, 28 Cal.Rptr.2d 475, 869 P.2d 454 (Cal. 1994); see also Swartz v. KPMG LLP, 476 F.3d 756, 765 (9th Cir. 2007) (stating that Rule 9(b) applies to claims alleging conspiracy to commit fraud).

Ghasemi moves to dismiss the first and second causes on the basis that the allegations are vague, conclusory, and fail to satisfy the particularity requirement of Rule 9(b). (Doc. No. 38 at 4-5.) Specifically, Ghasemi contends that although the FAC lists five statements that were allegedly made by Sotomayor between December 2009 and December 2010, the FAC does not provide any allegations as to how Ghasemi actively participated in the alleged fraudulent scheme at the time the representations were made, or even that Ghasemi knew these representations had been made, or were going to be made. Thus, Ghasemi contends Recmaq's arguments that he ratified Sotomayor's statements or conduct after the fact are insufficient to state a claim for fraud or conspiracy to commit fraud.

The Court is not inclined to agree. Although Recmaq alleges that multiple defendants had a part in perpetuating the alleged fraudulent scheme, the Court finds Recmaq has adequately pled Ghasemi's role in the alleged scheme. Swartz, 476 F.3d at 765 (stating that when there are multiple defendants, "a plaintiff must, at a minimum, identif[y] the role of [each] defendant[] in the alleged fraudulent scheme") (internal quotations and citations omitted). Specifically, Recmaq alleges that Ghasemi was at all relevant times a business partner and/or former employee of Hollywood Auto Mall, and that Ghasemi and Sotomayor were at all relevant times business partners, alter egos, agents, employees, and/or joint venturers. Recmaq supports this allegation with a letter from Sotomayor (FAC, Exs. A, B), and citation to a lawsuit filed by Ghasemi against Sotomayor in 2010, wherein Ghasemi represented to the Superior Court that Sotomayor was his business partner.[3]

Moreover, Recmaq alleges that in or around August 2005, Gluscevic, Recmaq's owner, visited both Sotomayor and Ghasemi at an office located at 1423 Broadway, El Cajon, California. (FAC § 27.) On one of these visits, Recmaq alleges that Glusevic spoke in English and Spanish with both Sotomayor and Ghasemi regarding the process for bidding on heavy machinery, and future business opportunities, and that Ghasemi personally showed Glusevic the process for how Ghasemi bid on machinery at auctions. ( Id. ) Recmaq then alleges that in or around March 2010, Sotomayor solicited an agree-ment from Recmaq for the purpose of providing Defendants additional time to either deliver the equipment to Recmaq as promised, or return the previously transferred funds. ( Id. at §§ 29, 30.) Recmaq alleges that Ghasemi knew of, abetted, and ratified each of Sotomayor's representations. ( Id. at §§ 42, 43, 46.) Each of these allegations are supported by the letter submitted by Sotomayor and attached to the FAC as Exhibits A and B.

Therefore, the Court finds Recmaq has adequately alleged fraud against Defendant Ghasemi. The FAC alleges that: (1) Ghasemi either made or ratified a false representa-tion; (2) Ghasemi knew the statement was false; (3) Ghasemi made such statement with the intent to defraud Recmaq; (4) Recmaq justifiably relied on such statement(s); and as a result (5) Recmaq sustained damages in the amount of $1, 099, 000.00. The Court also finds Recmaq has adequately alleged conspiracy to commit fraud against Defendant Ghasemi. The FAC alleges: (1) a conspiracy by and between the Defendants; (2) that Defendants, including Ghasemi, made continued misrepresentations in furtherance of the conspiracy; and as a result (3) Recmaq has sustained damages in the amount of $1, 099, 000.00. Thus, although further discovery may prove ...


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