United States District Court, N.D. California
JOHN J. RASMUSSEN, Plaintiff,
DUBLIN RARITIES, et al., Defendants
For John J. Rasmussen, Plaintiff: Robert Arthur Bailey, LEAD ATTORNEY, Frederick James Hickman, Anglin, Flewelling, Rasmussen, Campbell & Trytten, LLP, Pasadena, CA; Scott Thomas Reigle, LEAD ATTORNEY, AFRCT, LLP, Pasadena, CA.
For Ronald Witt, an individual, Defendant: Kevin J Keating, LEAD ATTORNEY, Law Office of Kevin J. Keating, Esq., Garden City, NY; Lawrence Scott Eisenberg, LEAD ATTORNEY, Lawrence S. Eisenberg and Associates, APC, Irvine, CA.
REPORT AND RECOMMENDATION RE: MOTION FOR DEFAULT JUDGMENT AGAINST DEFENDANTS RONALD WITT, ANTHONY SALIBA, AND DUBLIN RARITIES Re: Dkt. No. 59
JACQUELINE SCOTT CORLEY, United States Magistrate Judge.
Plaintiff John J. Rasmussen (" Plaintiff"), a serious coin collector, contends that Defendants Anthony Saliba (" Saliba"), Robert Dinardo (" Dinardo"), Ronald Witt (" Witt") along with their corporate entities Dublin Rarities and Centurion Collectables, Inc. (" Centurion, " and collectively, " Defendants"), engaged in a scheme to defraud Plaintiff of his savings through a series of misrepresentations involving the sale and exchange of misgraded and overvalued coins. Plaintiff now moves for default judgment, including actual damages in the amount of $434, 500; pre-judgment interest on and a constructive trust in the amount of $425, 645; treble damages of $1, 303, 500; and reasonable attorneys' fees and costs. (Dkt. No. 59.) This matter has been referred to the undersigned magistrate judge for a report and recommendation on Plaintiff's motion for default judgment. Because the Court finds this motion suitable for disposition without oral argument pursuant to Civil Local Rule 7-1(b), the Court VACATES the hearing previously set for January 22, 2015 and therefore DENIES AS MOOT Plaintiff's Motion to Appear by Telephone at that hearing. (Dkt. No. 68.) For the following reasons, the Court recommends that Plaintiff's motion for default judgment be GRANTED IN PART in the amount of $589, 353.70 as set forth below.
A. Allegations of the Complaint
Plaintiff is a semi-retired resident of Petaluma who has spent over two decades collecting rare and valuable coins as an investment tool and studying the field of numismatics. (Dkt. No. 1 ¶ ¶ 3, 10.) Defendants are individuals purporting to operate in rare coin sales and exchanges through their businesses, Centurion and later Dublin. These two businesses are merely the alter egos of the Individual Defendants. (Id. ¶ 46.)
By February of 2010 Plaintiff had amassed a significant private coin collection (the " Original Collection"), which two reputable coin grading services, Professional Coin Grading Service (" PGCS") and Numismatic Grading Corporation of America (" NGC") had graded-- i.e., valued. (Id. ¶ 10.) Defendants engaged in a scheme to defraud Plaintiff of not less than $434, 500 in rare coins and cash over a period of several years. As will be explained in further detail below, Defendants initially gained his trust by engaging in a proper transaction with appropriately valued coins, then began a campaign to dupe him out of his collection, all the while appearing to assuage his concerns until the end, when they kept Plaintiff's money and coins and offered nothing but silence in return. This scheme began in 2010. ( See id. ¶ 11.)
1. Initial Contact
Dinardo was the first Defendant to make contact with Plaintiff. In 2010 he cold-called Plaintiff's home representing himself as a rare coin dealer from New York. (Id. ¶ 11.) Dinardo was working for or as an agent of Centurion at this time. (Id.) Following this phone call, Dinardo and Plaintiff engaged in a series of small coin Trades. (Id. ¶ 12.) These Trades " were, from all outward appearance, legitimate, and served to build [Plaintiff's] confidence [in] the defendants' business practices." (Id.) Sometime after these trades with Dinardo, Defendant Saliba contacted Plaintiff, as well, indicating that he worked directly with Dinardo. (Id. ¶ 13.) Saliba and Dinardo were co-workers and in on the scheme together. (Id.) Saliba proposed a series of transactions, and Plaintiff entered two: in the first transaction, Saliba sold Plaintiff three coins for $2, 985; in the second, Saliba sold Plaintiff one coin for $5, 820. (Id.) Plaintiff refers to these four coins, along with the early trades with Saliba, as " Bait Coins." (Id.)
The trades with Dinardo and the Bait Coins with Saliba appeared legitimate-- i.e., the coins appeared to be properly graded--and served to build Plaintiff's trust and confidence in defendants' business. (Id. ¶ ¶ 12, 14.) These initial transactions were meant to " serve[ ] as the ground work for defendants' fraudulent scheme." (Id. ¶ 14.)
2. " Replacement Coins" Exchange
Following the initial transactions involving the alleged Bait Coins, Dinardo began to encourage Plaintiff to buy and/or exchange more rare and valuable coins " through ever larger transactions." (Id. ¶ 15.) Dinardo's main proposal was for Plaintiff " to exchange [his] entire Original Collection along with some of [his] cash, in a single transaction, for coins of equivalent or greater value that would appreciate in value faster than the Original Collection over time." (Id. ¶ 16.) Up to and during July of 2010, Dinardo continued to " implore[ ]" Plaintiff to engage in this transaction, " further representing, both expressly and by implication, that defendants would be able to assist Plaintiff in selling coins, as needed, to take advantage of favorable market conditions." (Id. ¶ 16.) In response to Dinardo's solicitations, he shipped his entire Original Collection to Dinardo in New York and completed a wire transfer of $129, 000 from his account to Dinardo's. (Id. ¶ 17.)
Thereafter, Dinardo shipped a set of replacement coins to Plaintiff (" Replacement Coins"). (Id. ¶ 18.) As of December 13, 2010, Dinardo stated that the Replacement Coins had a $434, 500 value and were graded by a reputable grading agency. (Id.) Defendants knew these statements were false and intended to have Plaintiff rely on them as part of their fraud to keep Plaintiff's Original Collection. (Id. ¶ 48.)
3. Plaintiff's Attempts to Sell and Defendants' Delay Tactics
In April of 2011, Plaintiff contacted Dinardo to inform him that he needed to sell some of the Replacement Coins to generate cash to pay for his daughter's wedding and satisfy his tax obligations. (Id. ¶ 19.) Dinardo ensured Plaintiff that he would sell the Replacement Coins and send Plaintiff a check within a few months. (Id. ¶ 20.) Months passed, however, and Plaintiff did not hear from Dinardo. ( See id. ¶ 21.) Between April and October, Plaintiff called and texted Dinardo dozens of times, but Dinardo did not respond. (Id.) With no word from Dinardo and strained for cash, Plaintiff withdrew funds from his retirement account--incurring transactional costs--to meet his financial obligations. (Id. ¶ 22.)
In November of 2011, Dinardo finally responded, telling Plaintiff that he had buyers in mind for the Replacement Coins. (Id. ¶ 23.) Plaintiff continued to work with Dinardo to sell the Replacement Coins because Dinardo had insisted on it, representing that he could get higher prices and make the sales faster than any other company. (Id.) Nevertheless, according to the complaint, Dinardo did not sell the Replacement Coins any time soon. Instead, on February 24, 2012, Dinardo told Plaintiff that he had a good relationship with several wholesalers and good selling months were approaching, and that Plaintiff would likely need to send Dinardo the Replacement Coins so that Dinardo could sell them himself for cash. (Id. ¶ 24.)
According to Plaintiff, each of the statements about Defendants' efforts to arrange the sale of the Replacement Coins or restore their value were knowingly false when made and intended to have Plaintiff rely on them as part of their fraud to keep Plaintiff's Original Collection. (Id. ¶ 48.)
4. Plaintiff's Realizations About the Replacement Coins
By April of 2012, the Replacement Coins still had not been sold. ( See id. ¶ ¶ 24-25.) Plaintiff left messages for Dinardo indicating his belief that the Replacement Coins' value should increase markedly given the increase in the market price of gold and silver. (Id. ¶ 25.) In light of this understanding, Plaintiff asked Dinardo to at least complete a " test sale" by selling one coin from the Replacement Coins so as to assure Plaintiff that their value had, in fact, increased in accordance with the market. (Id.)
In July of 2012, Plaintiff learned that the Replacement Coins were not actually as valuable as Dinardo had represented because they were initially graded by disreputable " sham" rating services. (Id. ¶ ¶ 26-27.) Plaintiff called Dinardo to express concern about the value of the Replacement Coins. (Id. ¶ 27.) In response, between July and December of 2012, both Dinardo and Saliba assured Plaintiff that they would re-grade the Replacement Coins or add other coins to bring Plaintiff's collection back to the represented value as of December of 2010. (Id. ¶ 28.) Such communications took place at least on October 24, 2012; January 29, April 16, May 1 and 14, and December 9, 2013, and were knowingly false when made. (Id. ¶ ¶ 28, 48.)
5. Centurion/Dublin Merger and Continued Misrepresentation
While Saliba and Dinardo made repeated assurances, their business, Centurion, merged into Dublin in November of 2012. (Id. ¶ 30.) Saliba--then an owner, agent, or employee of Dublin--called Plaintiff on December 5, 2012, and told Plaintiff that he was working with Dinardo on Plaintiff's matter and would help increase the value of Plaintiff's collection back to the represented value from December of 2010. (Id. ¶ 31.)
Similarly, on January 28 and 29, 2013, respectively, Witt and Saliba each called--purporting to work for Dublin--and told Plaintiff that they would help him recover the December 2010 represented value of the Replacement Coins and attempt to accelerate payment to Plaintiff. (Id. ¶ 32.) In April of 2013, Plaintiff faxed to Saliba a chart reflecting the Replacement Coins' 2010 represented value. (Id. ¶ 33.) On April 16, Saliba called to confirm receipt of the fax and reiterated that he would help with the re-grading swap. (Id. ¶ 34.) These statements about recovering the value of the Coins or effecting a re-grading swap were knowingly false when made and were made as part of Defendants' fraud. (Id. ¶ 48.) As a show of good faith for their continued business dealings, Saliba asked Plaintiff to buy a roll of quarters at a purportedly discounted price. (Id. ¶ 35.) Plaintiff agreed, and paid $1, 000 for the roll. (Id.)
Finally, on May 1, 2013, Saliba called Plaintiff and said that he had a client willing to exchange coin collections with Plaintiff. (Id. ¶ 36.) Saliba asked Plaintiff to ship the Replacement Coins to him, and that, if for any reason the sale with this client did not go through, Dublin would re-grade the Replacement Coins and return their December 2010 represented value to Plaintiff, as they had earlier agreed. (Id.) Again, these statements were false when made, and Defendants never intended to go through with a sale or return any value to Plaintiff. (Id. ¶ 48.) As instructed, Plaintiff shipped the Replacement Coins to Saliba at Dublin's address the very next day. (Id. ¶ 37.)
On May 14, 2013, after receiving the Replacement Coins, Saliba called Plaintiff again and shared his belief that many of the Replacement Coins were actually one or two rating grades below the value printed on the labels that accompanied the coins. (Id. ¶ 38.) Saliba reiterated that he would look for other coins to restore the represented December 2010 value of the Replacement Coin collection and would provide coins from his personal collection, if needed, to make Plaintiff whole. (Id. ¶ 39.)
6. Final Attempts at Out-of-Court Resolution
Following that May telephone call, however, Plaintiff heard nothing from Defendants until December, with the exception of a package containing four lower-graded coins that Saliba shipped to Plaintiff on July 16, 2013. (Id.) In December of 2013, after months of silence, Plaintiff contacted Saliba and Dinardo via telephone and email to inquire about his Replacement Coins, which Dublin had been holding since May 3, 2013. (Id. ¶ 40.) In an email on December 9, 2013, Saliba responded via email, reassuring Plaintiff that he " will in no way be losing [his] collection" and that the two would speak soon. (Id. ¶ 41 & Ex. A.)
Dinardo called Plaintiff on or about February 7, 2014, reiterating that Plaintiff's Replacement Coins were secure in Dublin's safe. (Id. ¶ 42.) On that call, however, Dinardo stated that he still believed the Replacement Coins were fairly graded and worth the value that he initially represented in December of 2010. (Id.)
On February 27, 2014--seven months after sending his Replacement Coins to Dublin to be exchanged or sold to recoup their value as Defendants promised--Plaintiff sent a final demand letter to Defendants demanding that they promptly provide him with either coins or cash to restore his property. (Id. ¶ 43 & Ex. B.) As of the filing of the complaint, Defendants had not responded to this final demand letter and continued to hold Plaintiff's coins and money. (Id. ¶ ¶ 43-44.) Defendants may have sold, traded, or otherwise disposed of his coins or are seeking to do so now, and have no intent to remit to Plaintiff the proceeds of such transactions. ( Id. ¶ 44.)
B. Procedural History
Met with silence after sending his final notice to Defendants, Plaintiff filed the instant eleven-count complaint on April 2, 2014. (Dkt. No. 1.) Plaintiff brings a number of common law claims against all Defendants, including intentional misrepresentation ( id. ¶ ¶ 47-54), negligent misrepresentation ( id. ¶ ¶ 55-61), fraud ( id. ¶ ¶ 62-71), conversion ( id. ¶ ¶ 72-76), unjust enrichment ( id. ¶ ¶ 77-81), money had and received ( id. ¶ ¶ 82-84), and breach of contract ( id. ¶ ¶ 85-92), and seeks a constructive trust to recover his money and property ( id. ¶ ¶ 93-94). In addition, Plaintiff alleges that Defendants' conduct constitutes an enterprise through a pattern of racketeering activity in violation of the Racketeer Influenced and Corrupt Organizations Act (" RICO"), 18 U.S.C. § § 1961-1968 ( id. ¶ ¶ 95-108) and conspiracy to commit a RICO violation ( id. ¶ ¶ 109-115). Finally, Plaintiff alleges that Defendants' conduct constitutes unfair competition in violation of California Business and Professions Code § 17200. (Id. ¶ ¶ 116-121.)
Plaintiff properly served the summons and complaint on Defendants Witt, Saliba, and Dublin (via its president, Witt) on April 24, 2014 (Dkt. Nos. 10-12), but was unable to locate Dinardo and Centurion to effect service. (Dkt. No. 59-2 ¶ 6.) Dublin never made an appearance in this matter and failed to answer or otherwise respond to the complaint within the time prescribed by the Federal Rules of Civil Procedure, so the Clerk of Court entered Dublin's default on June 17, 2014. (Dkt. No. 14.) As for Witt and Saliba, the process was not as simple: according to Plaintiff's counsel, an attorney returned waivers of service on behalf of both individuals. (Dkt. No. 59-2 ¶ 7.) The attorney entered an appearance solely for Witt; Saliba never appeared. ( See Dkt. No. 16.) Saliba failed to timely answer or otherwise file a responsive pleading, and the Clerk entered his default on July 8, 2014. (Dkt. No. 29.) Witt, on the other hand, began to litigate this case, filing a motion to dismiss for failure to state a claim upon which relief may be granted. (Dkt. No. 18.) However, after the Court denied the motion (Dkt. No. 57), Witt failed to answer the complaint or otherwise defend himself in this action. The Clerk, in turn, entered his default on September 3, 2014. (Dkt. No. 50.) Given their waivers of service and appearances in this matter, Plaintiff sent letters to Witt (through his attorney of record) and Saliba (at the offices of Dublin Rarities) regarding the Clerk's entries of default and the pending motion for default judgment on January 9, 2015. (Dkt. No. 67 at 4-6.) Nevertheless, since their defaults were entered, Witt, Saliba, and Dublin have not made any attempt to cure default or otherwise defend this action.
In the meantime, Plaintiff continued his efforts to serve the remaining defendants, Dinardo and Centurion. Having failed to locate and serve these defendants despite months of diligence, the Court granted Plaintiff's motion for service by publication of Dinardo and Centurion. ( See Dkt. No. 58.) Plaintiff completed service by publication on December 11, 2014 ( see Dkt. No. 64 at 2), and neither Dinardo nor Centurion timely answered or ...