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Jaffee v. Carryl

United States District Court, C.D. California

June 27, 2016

RUDOLPH CARRYL aka RUDY CARRYL, et al. Defendants.




         Plaintiffs Robert Jaffee and Barbara Jaffee are the victims of a financial scam allegedly perpetrated by Defendant Rudolph Carryl. In addition to suing Carryl, however, Plaintiffs have also sued multiple other defendants that are allegedly in possession of their money, including Defendants Oppenheimer & Co., Inc. and Freedom Investments, Inc. (collectively "Oppenheimer Defendants"). Plaintiffs assert claims against Oppenheimer Defendants for conversion and money had and received, and seek to impose a constructive trust on their funds they received from Carryl. On March 31, 2016, Defendants moved to dismiss Plaintiffs' First Amended Complaint. For the reasons discussed below, the Court GRANTS IN PART and DENIES IN PART Defendants' Motion.[1] (ECF No. 58.)


         Plaintiffs are a married couple residing in Los Angeles County. (First Am. Compl. ("FAC") ¶ 1.) They were looking for a new investment advisor to handle their investment portfolio and were introduced to Rudolph Carryl of Carryl Capital Management, LLC ("CCM"). (Id. ¶ 8.) After discussing Carryl's investment philosophies over several meetings, Plaintiffs transferred their portfolio to him. (Id.) In January 2012, Carryl solicited from Plaintiffs a "Special Situation Investment" for a pediatric healthcare facility that Carryl promised would return a profit of at least thirty percent by November 2012. (Id. ¶ 9.) Based on Carryl's representations, Plaintiffs transferred a total of $1.25 million to CCM's bank account. (Id. ¶ 10.) In September 2012, Carryl again solicited money from Plaintiffs for a second investment opportunity that he promised would return a profit of at least ten percent by December 2012. (Id. ¶ 11.) Based on this representation, Plaintiffs wired an additional $200, 000 to CCM. (Id. ¶¶ 12, 37.) On December 10, 2012, Plaintiffs received a notice from Carryl stating that their initial $1.25 million investment, plus a 32.1% gain-totaling $1, 651, 250.00-would be wired back to Plaintiffs' bank account on December 24, 2012. (Id. ¶ 13.) Plaintiffs did not receive the funds on December 24, 2012, and to this date Carryl still has not returned Plaintiffs' money. (Id. ¶¶ 14-15.) Plaintiffs allege that Carryl instead disbursed their money among the numerous defendants in this action, including the Oppenheimer Defendants. (Id. ¶¶ 17, 43-44.)

         On January 11, 2016, Plaintiffs filed a First Amended Complaint, which asserts three claims for relief against Defendants: conversion, money had and received, and imposition of a constructive trust. (Id. ¶¶ 42-52.) Plaintiffs' claims against Defendants are based on Carryl's alleged misappropriation of Plaintiffs' funds and the delivery of those funds to the Oppenheimer Defendants. (Id. ¶ 44.) On March 31, 2016, the Oppenheimer Defendants moved to dismiss Plaintiffs' First Amended Complaint. (ECF No. 58.) On May 2, 2016, Plaintiffs filed an Opposition to Defendants' Motion.[2] (ECF No. 71.) On May 9, 2016, the Oppenheimer Defendants filed their Reply. (ECF No. 77.) That Motion to Dismiss is now before this Court.


         A court may dismiss a complaint under Rule 12(b)(6) for lack of a cognizable legal theory or insufficient facts pleaded to support an otherwise cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). To survive a dismissal motion, a complaint need only satisfy the minimal notice pleading requirements of Rule 8(a)(2)-a short and plain statement of the claim. Porter v. Jones, 319 F.3d 483, 494 (9th Cir. 2003). The factual "allegations must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). That is, the complaint must "contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

         The determination whether a complaint satisfies the plausibility standard is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679. A court is generally limited to the pleadings and must construe all "factual allegations set forth in the complaint . . . as true and . . . in the light most favorable" to the plaintiff. Lee v. City of L.A., 250 F.3d 668, 688 (9th Cir. 2001). But a court need not blindly accept conclusory allegations, unwarranted deductions of fact, and unreasonable inferences. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001).

         As a general rule, a court should freely give leave to amend a complaint that has been dismissed. Fed.R.Civ.P. 15(a). But a court may deny leave to amend when "the court determines that the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency." Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir.1986); see Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000).


         The Oppenheimer Defendants argue that they are not liable for conversion because they were simply bailees of the money they received from Carryl. (Mot. 3- 5.) They also argue that the claim for money had and received does not exist without the predicate conversion claim, and also that Plaintiffs have failed to plead sufficient facts to state a claim for money had and received. (Mot. 5-6.) Finally, the Oppenheimer Defendants argue that the imposition of a constructive trust is a remedy, not a claim, and thus should also be dismissed. (Mot. 6.) For the reasons discussed below, the Court grants in part and denies in part the Motion.

         A. Conversion

         The Oppenheimer Defendants argue that they are merely bailees and thus not liable for conversion. "A bailment is generally defined as ‘the delivery of a thing to another for special object or purpose . . . to conform to the objects or purposes of the delivery which may be as various as the transactions of men.'" Windeler v. Scheers Jewelers, 8 Cal.App.3d 844, 850 (1970); United States v. Alcaraz-Garcia, 79 F.3d 769, 774 n.11 (9th Cir. 1996) ("A bailment is the deposit of personal property with another, usually for a particular purpose."). The bailor is the person who owns the thing or object; the bailee is the person entrusted with possession of the object. See Windeler, 8 Cal.App.3d at 850; Alcaraz-Garcia, 79 F.3d at 774 n.11. "A bailee who receives bailed property from a thief, without notice of the true owner's claim and returns the property to the bailor according to the terms of the bailment, is not liable for conversion." Software Design & Application v. Hoefer & Arnett, 49 Cal.App.4th 472, 485 (1996); see also Simonian v. Patterson, 27 Cal.App.4th 773, 782 (1994) ("[N]o conversion occurs when a mere bailee, whether common carrier, or ...

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