United States District Court, E.D. California
ORDER GRANTING DEFENDANT LOCAL 220'S MOTION TO
DISMISS IN PART AND GRANTING LEAVE TO AMEND (ECF NOS. 25, 27,
LAWRENCE J. O'NEILL, UNITED STATES DISTRICT JUDGE.
Wonderful Real Estate Development LLC
(“Wonderful” or “Plaintiff”) brings
this action under the Racketeer Influenced and Corrupt
Organizations Act (“RICO”), 18 U.S.C. §
1962, and also brings state law claims for violation of
California's Unfair Competition law, Cal. Bus. &
Prof. Code § 17200, and attempted extortion. Wonderful
sues the Laborers International Union of North America Local
220 (“Local 220”); Southern California District
Council of Laborers (“So. Cal. District
Council”); Jon P. Preciado; Ernesto J. Ordonez; Sergio
Rascon; and Alexander B. Cvitan (“Individual
Defendants”) (collectively “Defendants”).
8, 2019, Plaintiff filed a first amended complaint
(“FAC”) in response to Defendants' motions to
dismiss. ECF No. 21. Subject matter jurisdiction is alleged
pursuant to 28 U.S.C. §§ 1331, 1337 and 1367. Local
220, So. Cal. District Council, and the Individual Defendants
each filed separate motions to dismiss pursuant to the
Federal Rules of Civil Procedure raising different arguments
for dismissal of the five causes of action contained in the
FAC. ECF Nos. 25, 27, 29. Plaintiff opposed, ECF Nos. 33, 34,
35, and Defendants replied. ECF Nos. 38, 39, 40. The matter
was taken under submission on the papers pursuant to Local
Rule 230(g). After the motions to dismiss were taken off
calendar, Defendants filed a special motion to strike the two
state law claims pursuant to California's anti-SLAPP
statute, Cal. Code Civ. Proc. § 425.16, and Federal Rule
of Civil Procedure 12(f). ECF Nos. 44-45. Plaintiff opposed,
ECF No. 47, and Defendants replied. ECF No. 49. For reasons
set forth below, Defendant Local 220's motion to dismiss,
ECF No. 25, is granted in part and the other motions are
is a real estate development company that develops a variety
of industrial properties. FAC ¶ 14. Defendant So. Cal.
District Council is one of forty-four chartered district
councils of the Laborers' International Union of North
America (“LIUNA”). So. Cal. District Council has
14 affiliated local chapters, including Local 220.
Id. ¶ 15. “The objective of the [So.
Cal.] District Council is to ‘unify all of the economic
and other forces of the affiliated Local Unions in its area,
as a central representative body of such Local Unions[,
]'” and the Council has the authority to negotiate
for and enter into agreements with employers on behalf of its
affiliated local unions. Id. (quoting LIUNA District
Council's constitution). Id. Local 220 is an
affiliated local union of the So. Cal. District Council with
its principal place of business in Bakersfield, California.
Id. ¶ 16. Defendant Jon Preciado is the
Business Manager for So. Cal. District Council. Id.
¶ 18. Defendant Ernesto Ordonez is So Cal. District
Council's Secretary-Treasurer. Id.¶ 19.
Defendant Sergio Rascon is the Business Manager of Local 300,
President of So. Cal. District Council, and Vice President of
LIUNA. Id. ¶ 20. Defendant Alexander Cvitan
serves as General Counsel for LIUNA. Id. ¶ 17
alleges that Local 220, So. Cal. District Council, together
with the Individual Defendants, are part of an
association-in-fact enterprise that, along with the So. Cal.
District Council's other affiliated local unions,
comprise the “Union Enterprise.” Id.
¶ 2. The Union Enterprise is alleged to be engaged in a
continuing pattern and practice of filing sham litigation and
administrative challenges against real estate developers
under the California Environmental Quality Act
(“CEQA”), Cal. Pub. Res. Code § 21000,
et seq. It is alleged that the sole purpose of the
CEQA challenges is extorting developers for Project Labor
Agreements (“PLAs”) to force them to use
exclusively Union Enterprise labor for development projects.
Id. at ¶2. The So. Cal. District Council and
its local chapters, which are operating under its direction
and control, are filing sham CEQA actions against real estate
developers for the purpose of extracting PLAs for the
financial gain of its union and union members rather than for
environmental reasons. Id. ¶ 2. According to
The Union Enterprise's practice of challenging
construction projects under the guise of CEQA is rampant and
has become the status quo in Southern California on projects
that are of substantial enough scale to attract union
attention. In fact, this fraudulent, extortionist, and
anti-competitive conduct is so prevalent that the industry
has developed its own codeword to describe it:
“greenmail.” There is even a website
(www.phonyuniontreehuggers.com) dedicated to tracking union
opposition to countless public and private sector projects
throughout California “on environmental grounds ....
with the ulterior motive of extracting something of economic
value from the public or private owner.”
Id. ¶ 3. Most developers buckle under the
pressure and settle with the Union Enterprise to avoid the
delays and costs associated with sham CEQA litigation.
Id. ¶ 4. As a condition of settlement of the
CEQA action, developers sign PLAs committing to the exclusive
use of Union Enterprise labor. Id. This extortionist
business model serves to exclude nonunion contractors and
labor from a would-be competitive bidding process.
Id. ¶ 5.
has the development rights for an industrial park in the City
of Shafter. Id. ¶ 1. The park has 8 million
square feet of buildings, consisting predominantly of
distribution facilities but also including 16 large
retailers. Id. To date the industrial park has
created approximately 5, 000 jobs in the City of Shafter.
Id. There are future plans for further development.
Id. In October 2018, Wonderful Nut Orchard LLC sold
a parcel of land in Shafter, Lot 29A, to Wal-Mart Stores
East, L.P. so Wal-Mart could build a cold storage facility.
Id.¶ 26. The City of Shafter issued a project
approval and a notice of exemption for Lot 29A in October
2018. Id. ¶¶ 27-28. Also in October 2018,
the City of Shafter issued a project approval and a notice of
exemption to Wonderful for Wonderful's development of a
one million square foot distribution warehouse located at
4500 Express Avenue in Shafter, California (“Lot 16
Distribution Facility”). Id.
November 2018, following the City of Shafter's project
approvals for Lot 29A and the Lot 16 Distribution Facility,
the Union Enterprise filed a CEQA challenge to both
development projects in the Superior Court for the County of
Kern. Id. ¶ 8. The CEQA petition asserts that
the City of Shafter violated CEQA by treating the project
approvals as ministerial acts and issuing notices of
exemption without subjecting them to environmental reviews.
Id. ¶ 9-10. The Union Enterprise abandoned its
CEQA claim against Wal-Mart in January 2019 by filing a
request for dismissal allegedly after learning that Wal-Mart
had already hired a contractor for Lot 29A thus preventing
Local 220 from extracting a PLA from Wal-Mart for Lot 29A.
Id. “As to Wonderful, the Union Enterprise is
seeking to hold the Lot 16 Distribution Facility hostage
unless and until Wonderful agrees to enter into a PLA with
[the Union] for all of Wonderful's future Shafter
developments for the next ten years. At no point has
LIUNA requested any environmental review or expressed any
environmental concerns in conjunction with its demanded
ransom. For the Lot 16 Distribution Facility alone, Wonderful
would have incurred over $2 million in additional costs if it
were forced to use LIUNA labor.” Id. ¶ 10
(emphasis in original). The CEQA case concerning the Lot 16
Distribution Facility has not yet been adjudicated.
Id. ¶ 11.
alleges that upon information and belief, the Union
Enterprise is engaged in an ongoing pattern and practice of
filing sham CEQA oppositions without regard to the merits of
the action with the sole purpose of coercing, intimidating,
extorting, and pressuring developers to award them labor
agreements. Id. ¶ 35. The Union Enterprise
allegedly filed a CEQA action in Los Angeles Superior Court
challenging the Icon Panorama Project in Panorama City after
attempting to induce relevant governmental agencies to deny
approval for the Project for not complying with CEQA.
Id. ¶ 37-39.This Icon CEQA Action also allegedly was
brought without regard for the merits or environmental
concerns but for the alternate goal of forcing Icon to use
exclusively union labor for the project. Id.
alleges other examples of the Union Enterprise's
“extortionate conduct” including a CEQA challenge
to a 2.89 million square foot development park, Laborers
International Union of North America, Local 1184 v. City of
Beaumont et al., Riverside Sup. Ct. No. RIC1616400,
which was allegedly dismissed within months of filing after
obtaining a labor agreement from the developer. Id.
¶¶ 11, 41. In July 2018, the Union Enterprise filed
a CEQA action seeking to block construction of “Merge
56, ” a 72-acre mixed use project in San Diego County,
LIUNA Local Union 89 v. City of San Diego, No.
37-2018-00035233-CU-WM-NC (San Diego Super. Ct. filed July
13, 2018). Id. ¶42. The Merge 56 developers
reported that the Union Enterprise requested a PLA in
exchange for dismissal of its CEQA lawsuit and called for the
state legislature to prohibit disingenuous use of
environmental laws. Id. ¶43 (citing
In October 2018, the Union Enterprise filed a CEQA petition
seeking to block Palo Verde Center LLC's development of a
2.5 million square foot cannabis cultivation center in the
City of Blythe, Light, et al. v. City of Blythe, et
al., No. RIC1821829 (Riverside Super. Ct. filed Oct. 17,
2018), and the developer's CEO reported that LIUNA
requested a PLA as a condition to settle its environmental
lawsuit. Id. ¶¶ 44-45 (citing
Lastly, in November 2018, the Union Enterprise filed a CEQA
action in Los Angeles Superior Court to block construction of
“520 Mateo, ” a mixed use development in Downtown
Los Angeles, LIUNA, Local 300 v. City of Los Angeles, et
al., No. 18STCP03003 (Los Angeles Super. Ct. filed Nov.
30, 2018). Id. ¶ 46. The 520 San Mateo CEQA
action was for the sole purpose of extracting a PLA for its
union members but was dismissed in January 2019 without
obtaining any concession related to environmental review.
Id. ¶¶ 47-48. No. PLA was disclosed as
part of the dismissal. Id. ¶ 48. Wonderful
alleges that these examples are “merely the tip of the
iceberg when it comes to the Union Enterprise's
ubiquitous attempts to use the CEQA process for its own
self-dealing.” Id. ¶ 49. In sum,
Wonderful alleges six CEQA actions, including the City of
Shafter CEQA challenge, that were filed by the Union
Enterprise for an allegedly extortionary purpose.
engaging in the extortionist activities described, Local 220,
So. Cal. District Council and the Individual Defendants are
alleged to have violated RICO, the California unfair
competition laws, and have engaged in attempted extortion.
Id. ¶ 13 As to the individual Defendants, the
FAC alleges that they had some level of involvement with the
filings of CEQA challenges to extort PLAs. See Id.
¶¶ 17-20. Defendant Cvitan, LIUNA's
General Counsel, formed a non-profit organization, Support
Alliance for Environmental Responsibility
(“SAFER”), in January 2019 to challenge
development projects under CEQA in order to secure PLAs for
LIUNA. Id. ¶17. SAFER shares the same address
and suite number as the So. Cal. District Council.
Id. Defendant Cvitan communicated with Wal-Mart and
Wonderful regarding the Shafter CEQA challenges and offered
to dismiss the litigation in exchange for long term PLAs
between Wonderful and LIUNA. Id. Defendant Preciado
also was involved in forming SAFER for the purpose of
challenging development projects under CEQA in order to
secure PLAs for LIUNA. Id. ¶ 18. Defendant
Ordonez and Defendant Rascon are “aware of,
participate in, and ratif[y] the Union Enterprise's use
of meritless CEQA challenges to development projects and
negotiation of PLAs in settlement of such challenges.”
Id. ¶¶ 19-20. “The number of times
that [Ordonez and Rascon] ha[ve] been involved in the Union
Enterprise to extort labor agreements from developers is
unknown, but far exceeds two times.” Id.
FAC states five causes of action for: 1) violation of the
RICO, 18 U.S.C. § 1962(c); 2) violation of RICO, 18
U.S.C. § 1962(d), by conspiring to violate 18 U.S.C.
§ 1962(c); 3) violation of RICO, 18 U.S.C. §
1962(d), by conspiring to violate 18 U.S.C. § 1962(b);
4) violation of California's Unfair Competition law
(“UCL”), Cal. Bus. & Prof. Code §17200;
and 5) attempted extortion.
motion to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(6) is a challenge to the sufficiency of the allegations
set forth in the complaint. Navarro v. Block, 250
F.3d 729, 732 (9th Cir. 2001). A 12(b)(6) dismissal is proper
where there is either a “lack of a cognizable legal
theory” or “the absence of sufficient facts
alleged under a cognizable legal theory.”
Balistreri v. Pacifica Police Dept., 901 F.2d 696,
699 (9th Cir. 1990). In determining whether a complaint
states a claim upon which relief may be granted, the Court
accepts as true the allegations in the complaint, construes
the pleading in the light most favorable to the party
opposing the motion, and resolves all doubts in the
pleader's favor. Lazy Y Ranch Ltd. v. Behrens,
546 F.3d 580, 588 (9th Cir. 2008).
Rule 8(a), a complaint must contain “a short and plain
statement of the claim showing that the pleader is entitled
to relief, ” in order to “give the defendant fair
notice of what the . . . claim is and the grounds upon which
it rests.” Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570 (2007). A plaintiff is required to allege
“enough facts to state a claim to relief that is
plausible on its face.” Twombly, 550 U.S. at
570. “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, 556 U.S. 662, 678 (2009). “The plausibility
standard is not akin to a ‘probability
requirement,' but it asks for more than a sheer
possibility that a defendant has acted unlawfully.”
Id. (quoting Twombly, 550 U.S. at 556).
Rule 8(a) does not require detailed factual allegations,
“it demands more than an unadorned, the
Iqbal, 556 U.S. at 678. A pleading is insufficient
if it offers mere “labels and conclusions” or
“a formulaic recitation of the elements of a cause of
action.” Twombly, 550 U.S. at 555; see
also Iqbal, 556 U.S. at 678 (“Threadbare recitals
of the elements of a cause of action, supported by mere
conclusory statements, do not suffice.”). Moreover, it
is inappropriate to assume that the plaintiff “can
prove facts that it has not alleged or that the defendants
have violated the . . . laws in ways that have not been
alleged[.]” Associated Gen. Contractors of Cal.,
Inc. v. Cal. State Council of Carpenters, 459 U.S. 519,
526 (1983). In practice, “a complaint . . . must
contain either direct or inferential allegations respecting
all the material elements necessary to sustain recovery under
some viable legal theory.” Twombly, 550 U.S.
at 562. In other words, the complaint must describe the
alleged misconduct in enough detail to lay the foundation for
an identified legal claim.
without leave to amend is proper if it is clear that the
complaint could not be saved by amendment.” Kendall
v. Visa U.S.A., Inc., 518 F.3d 1042, 1051 (9th Cir.
2008). To the extent that the pleadings can be cured by the
allegation of additional facts, the Court will afford the
plaintiff leave to amend. Cook, Perkiss and Liehe, Inc.
v. N. Cal. Collection Serv. Inc., 911 F.2d 242, 247 (9th
Cir. 1990) (citations omitted).
Defendants in this case have brought three separate motions
to dismiss, pursuant to Federal Rule of Civil Procedure
12(b)(1) and 12(b)(6),  and a special motion to strike under
California's anti-SLAPP statute, Cal. Code Civ. Proc.
§ 425.16(e)(1), (2), and (4). Specifically, Local 220,
So. Cal. District Council, and the Individual Defendants each
brought a motion to dismiss positing different arguments in
each motion but joining in the others as well. See
ECF No. 25, 27, 29. After the motions to dismiss became ripe,
the Defendants then filed a special motion to strike the two
state law claims under California's UCL and for attempted
extortion. ECF Nos. 44-45. Local 220 submits that only if the
Court determines that Plaintiff has overcome the defenses in
Local 220's motion to dismiss should it turn to the
substance of the Plaintiff's causes of action on their
merits which are addressed in the two other motions to
dismiss. ECF No. 25-1 at 12. The special motion to