United States v. Ronca

          ORDER DENYING DEFENDANTS' MOTIONS TO DISMISS [52, 55]

          OTIS D. WRIGHT, III UNITED STATES DISTRICT JUDGE.

         I. INTRODUCTION

         The United States of America (the “Government”) brings two claims against Defendants Stephen Ronca (“Stephen”), Cynthia Ronca (“Cynthia”), and Joseph Ronca (“Joseph”) (collectively, “Defendants”) under the Federal Debt Collection Procedures Act, 28 U.S.C. § 3001, et seq. The Government files this civil action to recover proceeds from the sale of real property on October 26, 2017 to satisfy a restitution debt. (Compl. ¶ 1.)

         Defendants Stephen and Joseph move to dismiss on the grounds that the Government failed to: (1) state a claim; and (2) join the escrow company under Federal Rule of Civil Procedure (“Rule”) 19. (See generally Mot. to Dismiss Compl. (“Stephen Mot.”), ECF No. 52.; Mot. to Dismiss Compl. (“Joseph Mot.”), ECF No. 55)^[1]

         For the reasons that follow, the Court DENIES Defendants' Motions to Dismiss.

         II. BACKGROUND

         This is an action to recover proceeds of a real property sale to satisfy restitution owed by Stephen Ronca for embezzling money.^[2] (Compl. ¶ 9.) Stephen, Cynthia, and Joseph are siblings. (Compl. ¶¶ 5-7.) Stephen is a licensed attorney. (Compl. ¶ 9.) On May 30, 2017, the Government filed an indictment against Stephen for embezzling money from his client.^[3] (Compl. ¶ 9.)

         The real property in issue is located at 625 Al-Hil Drive, San Luis Obispo, CA 93405 (“Al-Hil Property”). (Compl. ¶ 10.) In February 2008, Stephen became the sole owner of the Al-Hil Property through two grant deeds. (Compl. ¶ 11.) In the first grant deed, John Ronca, father of the Defendants, transferred half of the interest to Stephen and half to his revocable trust. (Compl. Ex. A, ECF No. 1-1.) Three weeks later, John Ronca transferred the half interest in his trust to Stephen through a second deed. (Compl. Ex. B, ECF No. 1-1.)

         On October 26, 2017, Stephen sold the Al-Hil Property to “Trustees of the Shotts Living Trust dated August 22, 2000” for a net proceed of $394, 560.97, which was deposited in Cynthia's account. (Compl. ¶¶ 12-14.) The following day, Cynthia withdrew three cashier's checks in the amount of $100, 000, $111, 500, and $150, 700. (Compl. ¶ 15.) Cynthia deposited the checks in the amount of $100, 000 and $111, 500 in two separate bank accounts under her name. (Compl. ¶ 16.) She then immediately withdrew $100, 000 from the account in which she had deposited the $100, 000 check. (Compl. ¶ 16.) Cynthia gave Joseph the third check in the amount of $150, 700. (Compl. ¶ 17.)

         On November 3, 2017, the Government brought suit against Defendants alleging fraudulent transfers of funds pursuant to 28 U.S.C. §§ 3304(b)(1)(A) & (b)(1)(B). (See Compl.) From December 13, 2017 to January 16, 2019, this civil action was stayed pending resolution of the criminal matter. (See Order Regarding Deposit of Funds into the Court's Registry, ECF No. 12; Order Lifting Stay, ECF No. 21.) On August 27, 2019, Defendants Stephen and Joseph filed motions to dismiss. (See Stephen Mot.; Joseph Mot.)

         III. LEGAL STANDARD

         A. 12(b)(6)

         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. 1988). 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) (internal quotation marks omitted).

         The determination of 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 Los Angeles, 250 F.3d 668, 679 (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). Plaintiffs pleading fraud must do so with heightened particularity. See Fed.R.Civ.P. 9(b). Rule 9(b) establishes that an allegation of “fraud or mistake must state with particularity the circumstances constituting fraud.” The “circumstances” required by Rule 9(b) are the “who, what, when, when, where, and how” of the fraudulent activity. Cafasso v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055 (9th Cir. 2011). In addition, the allegation “must set forth what is false or misleading about a statement, and why it is false.” Id. This heightened pleading standard ensures that “allegations of fraud are specific enough to give defendants notice of the particular misconduct which is alleged to constitute the fraud charged so that they can defend against the charge and not just deny that they have done anything wrong.” Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 1985).

         When a district court grants a motion to dismiss, it 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). Leave to amend, however, “is properly denied . . . if amendment would be futile.” Carrico v. City & Cty. of San Francisco, 656 F.3d 1002, 1008 (9th Cir. 2011).

         B. 12(b)(7)

         Under Rule 12(b)(7), a party may seek dismissal of a complaint for failure to join an indispensable party under Rule 19. Fed.R.Civ.P. 12(b)(7). Rule 19 states “[a] person who is subject to service of process and whose joinder will not deprive the court of subject-matter jurisdiction must be joined” if “in that person's absence, the court cannot accord complete relief among existing parties.” Fed.R.Civ.P. 19. If joinder is not feasible, “the court must ...