Metaxas v. Lee ( 2020 )

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 POPPI METAXAS, Case No. 19-cv-03819-EMC 8 Plaintiff, ORDER GRANTING DEFENDANTS’ 9 v. MOTION TO DISMISS 10 KENNETH LEE, et al., Docket No. 57 11 Defendants. 12 13 14 I. INTRODUCTION 15 Plaintiff Poppi Metaxas brought this action under the Racketeer Influenced and Corrupt 16 Organizations Act of 1970 (“RICO”) against nine defendants (“Defendants”), all employees or 17 former employees of the community bank she once ran as CEO. Ms. Metaxas alleges that 18 Defendants have “denied her claim for retirement benefits as part of a long-running criminal 19 scheme to inflate the bank’s assets with funds set aside for her retirement plan.” Docket No. 48 20 (“Order”) at 1. In June 2020, Ms. Metaxas filed a Corrected First Amended Complaint (“FAC”) 21 after this Court granted Defendants’ motion to dismiss her original complaint for failing to state a 22 claim for relief. Defendants now move to dismiss the FAC on the same grounds. For the 23 following reasons, the Court GRANTS Defendants’ motion and does so with prejudice. 24 II. BACKGROUND 25 A. Factual Background 26 The facts of this case were originally stated in the Court’s order of May 20, 2020, granting 27 Defendants’ motion to dismiss Ms. Metaxas’s original complaint. See Order at 2-4. Gateway is a 1 Gateway’s CEO from 1995 until her resignation in May 2010. Id. ¶¶ 1, 66. In 2004, Gateway 2 gave Ms. Metaxas a $290,000 raise but the money was not paid to her directly. Id. ¶ 2. Instead, 3 Gateway used it to pay the premiums for a $5 million life insurance policy, which was to fund “a 4 customized supplemental executive retirement plan” (“SERP”) for Ms. Metaxas. Id. Under the 5 SERP, Ms. Metaxas would become eligible for retirement benefits shortly after her retirement or 6 her sixtieth birthday, whichever occurred later. Id. Exs. A & B. If Ms. Metaxas resigned 7 voluntarily she would be entitled to all benefits that had already accrued, but if she was fired for 8 cause she would not be entitled to any benefits. Id. Ex. A at 4–5. 9 Then came the financial crisis. By late 2008, a federal regulatory agency, the Office of 10 Thrift Supervision (“OTS”), had instructed Gateway “to increase its capital position to provide 11 coverage for potential losses from increasing levels of troubled assets.” Id. ¶ 4. Gateway’s Board 12 was also directing the bank’s executives to raise capital and sell troubled assets. Id. 13 It was at this point that trouble began for Ms. Metaxas and Gateway. Ms. Metaxas and 14 Gateway’s Vice President, Michael Kenny, orchestrated a transaction in which Gateway loaned its 15 largest customer, Ideal Mortgage, $3.65 million. Id. ¶ 54; Defendant’s RJN (Docket No. 57-2), 16 Ex. B, Tr. of Pleading at 18–21. That money came straight back to Gateway, as the down 17 payment on certain troubled assets that federal regulators wanted off the bank’s books. Id. 18 Although the transactions were intended to “make Gateway’s books look more acceptable to 19 regulators,” Ms. Metaxas would later admit that, “[t]aken together, [they] did not actually improve 20 the condition of the bank.” Id. OTS was not fooled in any event, and the so-called Round-Trip 21 Transaction led to greater regulatory scrutiny. FAC ¶ 6. In April 2009, OTS issued a cease-and- 22 desist order, which among other things directed Gateway to “maintain certain minimum regulatory 23 capital ratios.” Id. ¶ 4. 24 According to the FAC, the cease-and-desist order was the catalyst for a plot to fraudulently 25 deprive Ms. Metaxas of her SERP benefits. The scheme began on April 20, 2010, when 26 defendants Tim Green, Lawrence Fentriss, and Lawrence Wang, along with James Baxter,1 27 1 illegally “eliminated GATEWAY’s SERP PLAN liability” to Ms. Metaxas to meet the minimum 2 net capital requirements mandated by the cease-and-desist order. Id. ¶ 7(b), 78. (Defendants, 3 however, argue that this liability was never “eliminated” because it was always part of the bank’s 4 general assets, and never specifically set aside for the SERP; see infra re: predicate act of 5 abstraction.) Appropriating the funds allowed Green, Fentriss, Wang and various other defendant 6 officers and directors of Gateway to fraudulently report to the FDIC and OTS (later the Office of 7 the Comptroller of the Currency (“OCC”)) that Gateway had approximately $1.24 million more in 8 assets than it actually did. Id. ¶ 7(b), 78-80. That in turn helped Gateway meet the net capital 9 requirements imposed by OTS/OCC and avoid the regulatory consequences (e.g., higher deposit 10 insurance premiums) that would otherwise have followed. Id. Gateway’s false reporting to the 11 regulatory agencies allegedly continues to the present day. See, e.g., id. ¶ 7(b)-(c). 12 The next step in the scheme was to deny Ms. Metaxas her SERP benefits. Ms. Metaxas 13 had begun receiving cancer treatments in 2008, went on sick leave in March 2010, and submitted 14 her resignation to the Board of Directors on May 26, 2010. Id. ¶ 3. The Board accepted Ms. 15 Metaxas’s resignation the next day. Id. ¶ 66. On March 25, 2013, a few weeks before her sixtieth 16 birthday, Ms. Metaxas submitted her claim for SERP benefits. Id. ¶¶ 69–70. Her claim was 17 denied on February 25, 2016 by a SERP Administrative Committee composed of Defendants 18 Kenneth Lee and James Joseph Keefe, and Oakland Branch Manager Frances Baker. Id. ¶ 99. 19 Ms. Metaxas alleges that the basis for the denial was fraudulent because, e.g., the committee stated 20 that she was not disabled when she ended her employment with Gateway, was not owed the 21 benefits that had accrued as of her resignation, and had not performed at a level meriting SERP 22 benefits. Id. Ms. Metaxas appealed the denial of her claim. Id. ¶ 100. An appeals committee 23 composed of defendants Dale McKinney, Colin Madden, and Vinod Thukral then denied her 24 appeal, again based on allegedly false statements. Id. In denying Ms. Metaxas’s request for 25 benefits, the committee explained that “[Metaxas] did not qualify for SERP benefits because 26 ‘ample evidence shows Ms. Metaxas’s willful and intentional violation of banking laws, most 27 notably her own guilty plea,’ warranted termination for cause such that [Metaxas] was not entitled 1 (describing SERP provisions that allowed the bank to discontinue participation in the plan). 2 The final step in the scheme was lying to law enforcement to hide the wrongful elimination 3 of Gateway’s liability to Ms. Metaxas and the ensuing false statements to federal regulators. By 4 June 2011, law enforcement was investigating the Round-Trip Transaction. FAC ¶ 89. Ms. 5 Metaxas alleges that various defendants made false statements in interviews with the FBI and the 6 U.S. Attorney’s Office and in affidavits filed with a United States district court. Id. ¶ 10. These 7 false statements fell into two categories: exaggerations of the damages Gateway suffered because 8 of Ms. Metaxas’s conduct, and false claims that Ms. Metaxas was fired (or knew she was going to 9 be fired). See, e.g., id. ¶¶ 10, 73. 10 Ms. Metaxas eventually pled guilty to one count of conspiracy to commit bank fraud in the 11 Eastern District of New York in April 2015. Id. ¶ 73. At her plea hearing, Ms. Metaxas admitted 12 that she helped arrange the Round-Trip Transaction and that she “did not provide the complete 13 information about th[is] transaction[ ] to Gateway’s board.” Docket No. 57-2 (“Defendants’ 14 RJN”), Ex. B, Tr. of Pleading at 18–19. Ms. Metaxas further acknowledged that she “knew it was 15 against the law to commit a fraudulent scheme like this.” Id. at 22. Ms. Metaxas later filed a 16 petition “to overturn her guilty plea and conviction . . . on grounds of ineffective assistance of 17 counsel”; the petition was denied earlier this year and is currently on appeal. FAC ¶ 104. 18 In July 2015, Gateway sued Ms. Metaxas in the Superior Court of San Mateo County, 19 California, “seeking damages it allegedly suffered as a result of the Round-Trip Transaction.” Id. 20 ¶ 74. After an eight-day bench trial, the court ruled for Gateway. Mot. at 1. It emphasized that 21 Ms. Metaxas admitted, when pleading guilty, that she had been an integral part of the criminal 22 scheme. Mot. at 6 (quoting Defendants’ RJN, Ex. A, State Court Decision at 11-17); see also 23 Defendants’ RJN, Ex. A, State Court Decision at 12 (finding that Metaxas understood the 24 fraudulent nature of the Round-Trip Transaction when she presented it to the Gateway board and 25 intentionally misled the board into believing the Transaction was legitimate). Ms. Metaxas has 26 since moved to vacate the judgment. Mot. at 1 n.4. 27 B. Procedural Background 1 original complaint. There, Defendants argued that Ms. Metaxas’s claims were (1) barred by the 2 doctrine of collateral estoppel, (2) untimely, and (3) inadequately pled. See Order at 5. The Court 3 rejected the first and second of these contentions but agreed with the third, concluding, inter alia, 4 that Ms. Metaxas failed to allege a “pattern of racketeering activity” within the meaning of RICO. 5 Id. at 17-20. 6 1. Collateral Estoppel 7 Defendants first argued that because Ms. Metaxas previously “pled guilty to conspiring 8 against Gateway and deceiving its Board” she could not later allege “that Defendants committed 9 predicate RICO acts by creating a false pretext for denying her SERP benefits.” Id. at 7 (internal 10 quotations omitted). But the Court held that her guilty plea did not preclude Ms. Metaxas from 11 alleging, e.g., “that denial of her SERP benefits was premised on fraudulent misrepresentations,” 12 as this contention is “unrelated to her criminal conviction.” Id. at 7-8. Ms. Metaxas’s guilty plea 13 therefore did not bar her RICO claims. Id. at 8. 14 2. Statute of Limitations 15 The Court also disagreed that Ms. Metaxas’s claims were barred by RICO’s four-year 16 statute of limitations. Defendants argued that Ms. Metaxas became aware of her underlying injury 17 (i.e., the denial of SERP benefits) more than four years before she filed her complaint in July 2019 18 because she was entitled to begin receiving benefits shortly after her sixtieth birthday in May 19 2013. Id. at 8-9. Ms. Metaxas countered that the limitations period had been “contractually or 20 equitably tolled by a series of tolling agreements between her and Gateway.” Id. at 9; see also 21 FAC Exs. C-G. The Court concluded that these agreements governed only claims that might be 22 brought between Ms. Metaxas and Gateway, not those between her and the bank’s officers and 23 directors. Id. at 9-10 (citing Resolution Trust Corp. v. Bonner, 848 F. Supp. 96, 98-99 (S.D. Tex. 24 1994)). Nevertheless, the Court accepted Ms. Metaxas’s alternative argument that her complaint 25 was timely “because she did not know (and had no reason to know) of her injury until the SERP 26 Administrative Committee denied her claims in February 2016.” Id. at 10. And as the “tolling 27 agreements applied to Ms. Metaxas’s claim for SERP benefits,” Ms. Metaxas “could not have 1 expired.” Id. Since the last of these agreements did not terminate until July 2015, Ms. Metaxas’s 2 filing of this action in July 2019 was timely on this basis, as well. Id. 3 3. Adequacy of Pleading a RICO Claim 4 In response to Defendants’ argument that Ms. Metaxas failed to adequately plead her 5 RICO claims, the Court considered Ms. Metaxas’s allegations of Defendants’ (1) predicate acts, 6 (2) pattern of racketeering activity, and (3) causation—all required elements of a RICO claim 7 under 18 U.S.C. § 1962(c). See id. at 11. 8 Ms. Metaxas’s original complaint alleged several categories of predicate acts, including 9 false statements to federal regulators, money-laundering violations, and illegal abstraction of 10 “Gateway’s liability for her SERP benefits.” See id. 11 As to the first category, Ms. Metaxas argued that Defendants’ false statements to regulators 12 at the FDIC and OTS/OCC constituted mail and wire fraud under 18 U.S.C. §§ 1341 and 1343. 13 Id. at 12. Defendants responded “that these allegations fail[ed] to satisfy Rule 9(b)’s heightened 14 pleading standard for fraud.” Id. The Court disagreed, pointing to extensive factual details in 15 what are now ¶¶ 83 ff. of the FAC.2 Id. at 12-13. Ms. Metaxas therefore “sufficiently allege[d] 16 the who, when, where, and why required by Rule 9(b).” Id. at 13. But the Court also held that the 17 complaint did not adequately allege that Defendants’ misleading statements “somehow ‘deprive[d] 18 [the regulatory agencies] of money or property,’” as required by the mail and wire fraud statutes. 19 Id. at 13 (quoting United States v. Miller, 953 F.3d 1095, 1101 (9th Cir. 2020)). The mail and 20 wire fraud accusations thus failed to constitute predicate acts under RICO. 21 Regarding the last two categories, Defendants did not contest the adequacy of Ms. 22 Metaxas’s allegations that they had illegally abstracted her pension funds in violation of 18 U.S.C. 23 § 664, and the Court held that this predicate was sufficiently pled. Id. at 16. “In contrast, the 24 money laundering allegations [were] not well-pled” because Ms. Metaxas failed to explain how 25 certain Gateway financial reports relating to the Round-Trip Transaction “involved proceeds from 26 an unlawful transaction,” as required by 18 U.S.C. §§ 1956 and 1957. Id. at 17. The Court thus 27 1 concluded that “only the final category of predicate acts, illegal abstraction from a pension plan,” 2 qualified as an underlying offense for RICO purposes. Id. at 11. 3 The dispositive portion of the Court’s opinion concerned Ms. Metaxas’s failure to allege a 4 “pattern of racketeering activity” because of two shortcomings in the original complaint. First, 5 such a pattern “‘requires at least two’ predicate acts committed ‘within ten years,” and Ms. 6 Metaxas “alleged only one predicate act, abstraction from a pension fund.” Id. at 17 (quoting 18 7 U.S.C. § 1961(5)). Second, even if her mail and wire fraud allegations had been adequately pled, 8 Ms. Metaxas failed to satisfy the “continuity” requirement of RICO, as she alleged only “a single 9 scheme (to unlawfully deny her retirement benefits) with a single victim (herself).” Id. at 18. 10 Specifically, “her allegations of false reports to regulatory agencies and law enforcement” failed to 11 establish open-ended continuity since these “were the inevitable consequence, or at most cover-up, 12 of the completed criminal scheme,” id., and “efforts to conceal a completed criminal scheme do 13 not establish a threat of additional criminal activity in the future,” id. at 19. And “despite the fact 14 several years passed between the alleged abstraction of Ms. Metaxas’s SERP benefits and the 15 formal denial of her SERP claim,” “additional factors, such as the number of predicate acts, 16 victims, and injuries” all argued against a finding of closed-ended continuity. Id. at 20. Because 17 Ms. Metaxas failed to plead either sufficient predicate acts or continuity of wrongdoing, as 18 required by RICO’s “pattern” element, her claim as a whole failed. 19 The Court concluded its analysis by ruling that Ms. Metaxas “adequately alleged both but- 20 for and proximate causation” in linking Defendants’ predicate acts to her injury. Id. at 20. But her 21 additional claim that Defendants violated RICO’s conspiracy provision, 18 U.S.C. § 1962(d), was 22 rejected, as she did not sufficiently plead a substantive violation of the Act under § 1962(c). Id. at 23 21-22. 24 The Court therefore dismissed Ms. Metaxas’s original complaint, characterizing her claims 25 as presenting “a single garden-variety fraud,” id. at 1, rather than “a continuing criminal 26 conspiracy,” id. at 22. Ms. Metaxas was, however, given leave to amend. Id. She filed the FAC 27 1 in late June 2020 and Defendants moved to dismiss at the end of July. See FAC, Mot.3 2 III. LEGAL STANDARD 3 Federal Rule of Civil Procedure 8(a)(2) requires a complaint to include “a short and plain 4 statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). A 5 complaint that fails to meet this standard may be dismissed pursuant to Rule 12(b)(6). See Fed. R. 6 Civ. P. 12(b)(6). 7 To overcome a Rule 12(b)(6) motion to dismiss after the Supreme Court's decisions in 8 Ashcroft v. Iqbal, 556 U.S. 662 (2009), and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), 9 a plaintiff's “factual allegations [in the complaint] must . . . suggest that the claim has at least a 10 plausible chance of success.” Levitt v. Yelp! Inc., 765 F.3d 1123, 1135 (9th Cir. 2014) (internal 11 quotation omitted). The court “accept[s] factual allegations in the complaint as true and 12 construe[s] the pleadings in the light most favorable to the nonmoving party.” Manzarek v. St. 13 Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). But “allegations in a 14 complaint . . . may not simply recite the elements of a cause of action [and] must contain sufficient 15 allegations of underlying facts to give fair notice and to enable the opposing party to defend itself 16 effectively.” Levitt, 765 F.3d at 1135 (quoting Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 17 2011)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the 18 court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” 19 Iqbal, 556 U.S. at 678. “The plausibility standard is not akin to a ‘probability requirement,’ but it 20 asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (quoting 21 Twombly, 550 U.S. at 556). 22 Claims for fraud must meet the heightened pleading standard of Federal Rule of Civil 23 Procedure 9(b), which requires a party “alleging fraud or mistake [to] state with particularity the 24 circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). Rule 9(b) “requires . . . an 25 3 In February 2020, Ms. Metaxas filed another action against Gateway and the SERP Plan in this 26 District, “challenging the same denial of benefits under the Plan that is the grounds for her RICO claims” here. Docket No. 49 at 2; see Case No. 20-cv-01184-JD. In the newer case, Ms. Metaxas 27 asserted two causes of action against Defendants and the Plan under ERISA, 29 U.S.C. § 1132(a). 1 account of the time, place, and specific content of the false representations as well as the identities 2 of the parties to the misrepresentations.” Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007) 3 (internal quotation marks omitted). 4 IV. DISCUSSION 5 In response to the original complaint’s shortcomings, Ms. Metaxas strenuously attempts to 6 characterize Defendants’ denial of Ms. Metaxas’s SERP benefits as but one aspect of an elaborate 7 scheme to defraud federal banking regulators. Ms. Metaxas once again claims violations of RICO 8 under 18 U.S.C. ¶¶ 1962(c) and (d); the FAC alleges new predicate acts of mail and wire fraud (18 9 U.S.C. §§ 1341 and 1343), bank fraud (18 U.S.C. § 1344), and money laundering (18 U.S.C. 10 §§ 1956 and 1957). See FAC ¶ 122. Ms. Metaxas also continues to allege abstraction from a 11 pension or employee benefit fund (18 U.S.C. § 664), which the Court found adequately pled in her 12 original complaint. See id. 13 Defendants offer four arguments for why the FAC should be dismissed. First (and despite 14 the Court’s earlier ruling), Ms. Metaxas’s claims are time-barred by the statute of limitations. 15 Mot. at 2. Second, Ms. Metaxas’s “allegations of the two predicate acts of money laundering and 16 mail and wire fraud are not adequately pled with any specificity” and so fail to satisfy Rule 9(b). 17 Id. Third, the FAC fails to “allege the requisite intent to conceal or disguise the nature, source, 18 [or] ownership of SERP funds” in accusing Defendants of money laundering. Id. And fourth, Ms. 19 Metaxas again “cannot plead ‘continuity’ of the alleged criminal activity given that the alleged act 20 (the denial of her SERP benefits) is over.” Id. 21 A. Request for Judicial Notice 22 Both parties request that the Court take notice of numerous documents. Courts may take 23 judicial notice of facts that are “not subject to reasonable dispute” because they (1) are “generally 24 known within the trial court’s territorial jurisdiction,” or (2) “can be accurately and readily 25 determined from sources whose accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b). 26 Matters of public record may be judicially noticed, but disputed facts contained in those records 27 may not. Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 999 (9th Cir. 2018). 1 (“Defendants’ RJN”) at 1-2. Eight of them relate to the earlier judicial proceedings involving Ms. 2 Metaxas and Gateway. Id. at 2-3. Because these documents are public court records, they are 3 properly subject to judicial notice. See Bennett v. Medtronic, Inc., 285 F.3d 801, 803 n.2 (9th Cir. 4 2002). The Court, however, does not take notice of the truth of the statements contained therein. 5 The ninth document is a redacted copy of the SERP appeals committee’s decision denying Ms. 6 Metaxas’s benefits. Defendants’ RJN at 3, Ex. F. As the FAC necessarily relies on this document 7 and Ms. Metaxas does not contest its authenticity, judicial notice is appropriate for the appeals 8 committee decision as well, although again not necessarily for the truth of any matters asserted 9 therein. See Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001). 10 Ms. Metaxas requests that the Court take notice of the 2000 Statement of the Financial 11 Accounting Standards Board (“FASB”), which is referenced in her opposition brief. See Docket 12 No. 60 (“Plaintiff’s RJN”) at 1; Docket No. 59 (“Opp’n”) at 8-9. Defendants contest the request 13 because, they argue, Ms. Metaxas is asking the Court “to take judicial notice of documents for the 14 truth of their contents and to accept conclusions that Plaintiff seeks to draw from them,” namely 15 that “the FASB sets forth the standard applicable to Defendants and the alleged failure to abide by 16 those standards satisf[ies] the RICO pleading requirements.” Docket No. 62 at 1-2. As with the 17 parties’ other requests, the Court takes notice of the FASB standards, without reaching any 18 conclusion as to the truth or accuracy of the statements therein or their applicability to Defendants. 19 B. Statute of Limitations 20 Defendants argue, as they did in their earlier motion to dismiss, that because “RICO claims 21 are subject to a four-year statute of limitations,” Ms. Metaxas’s claims are time-barred. Mot. at 22 11. They contend that she was (or should have been) aware of her injury when she was denied 23 SERP benefits in 2013, or at least when she filed a counter-complaint seeking payment of those 24 benefits in the Superior Court action in late 2015. Id. at 12; see also Docket No. 61 (“Reply”) at 25 2-5. Defendants specifically point to language in Ms. Metaxas’s original complaint suggesting 26 that she “‘had enough information to warrant an investigation which, if reasonably diligent, would 27 have led to discovery of the [alleged] fraud’ in May of 2013.” Reply at 3. 1 Metaxas’s RICO claims did not begin running “until the SERP Administrative Committee denied 2 her claim [for benefits] in February 2016.” Order at 10. As Ms. Metaxas points out, “Defendants 3 made the exact same arguments on their Rule 12(b)(6) motion attacking the original complaint,” 4 including by pointing to Ms. Metaxas’s cross-complaint in the state court action. Opp’n at 4; 5 Docket No. 22 at 13. In reaching its earlier decision, the Court also had the benefit of 6 supplemental briefing on the effect of the tolling agreements vis-à-vis the statute of limitations. 7 See Opp’n at 4; Order at 4, 9-10. In sum, the motion “cites to no new authority and presents no 8 new facts” to support Defendants’ argument. Opp’n at 4. That argument is therefore again 9 rejected. 10 C. Adequacy of Pleading a RICO Claim 11 Ms. Metaxas alleges that Defendants have committed RICO violations under 18 U.S.C. 12 § 1962(c)-(d). Section 1962(c) provides: 13 It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate 14 or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a 15 pattern of racketeering activity or collection of unlawful debt. 16 Section 1962(d) provides: ‘‘It shall be unlawful for any person to conspire to violate any of the 17 provisions of subsection (a), (b), or (c) of this section.’’ 18 To successfully plead a civil RICO claim under § 1962(c), plaintiffs must plausibly allege 19 that Defendants engaged in “(1) conduct (2) of an enterprise, (3) through a pattern (4) of 20 racketeering activity.” Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985). Plaintiffs must 21 also satisfy RICO’s statutory standing provisions, which require them to plausibly allege an injury 22 to “business or property” that is proximately caused “by reason of a violation of section 1962.” 18 23 U.S.C. § 1964(c); see also Diaz v. Gates, 420 F.3d 897, 900-901 (9th Cir. 2005) (en banc) 24 (discussing the “business or property” and causation requirements of § 1964(c)). Ms. Metaxas and 25 Defendants principally dispute whether she has satisfied the “racketeering activity” (or predicate 26 act) and “pattern” elements of § 1962(c). 27 1. Predicate Acts 1 United States Code,” namely those enumerated at 18 U.S.C. § 1961(1). Turner v. Cook, 362 F.3d 2 1219, 1229 (9th Cir. 2004). The FAC’s allegations of racketeering activity fall into four 3 categories: (1) “alleged false statements to the regulators regarding Gateway’s financial 4 condition,” i.e., mail and wire fraud; (2) “alleged false statements to the Board of Directors . . . 5 regarding Plaintiff’s entitlements to SERP benefits,” i.e., bank fraud; (3) “alleged money 6 laundering by transferring SERP funds into a regular compensation account and paying general 7 compensation expenses with SERP funds; and (4) “illegal abstraction from a pension plan.” Mot. 8 at 13-14. Each of these crimes qualify as valid predicate acts under RICO. See 18 U.S.C. 9 § 1961(1). 10 a. Mail and Wire Fraud 11 As in her original complaint, Ms. Metaxas alleges that on numerous occasions several 12 defendants “authorized and approved the submission of financial information and statements, 13 including Call Reports, to the FDIC and OTS/OCC falsely omitting GATEWAY’s liability to 14 PLAINTIFF’s SERP PLAN,” and thus committed mail and wire fraud in violation of 18 U.S.C. §§ 15 1341 and 1343. See, e.g., FAC ¶ 90; see also id. Apps. A & B. Sections 1341 and 1343 each 16 prohibit “any scheme or artifice to defraud, or for obtaining money or property by means of false 17 or fraudulent pretenses, representations, or promises.” “The mail and wire fraud statutes are 18 identical except for the particular method used to disseminate the fraud, and contain three 19 elements: (A) the formation of a scheme to defraud, (B) the use of the mails or wires in 20 furtherance of that scheme, and (C) the specific intent to defraud.” Eclectic Props. E., LLC v. 21 Marcus & Millichap Co., 751 F.3d 990, 997 (9th Cir. 2014). Additionally, as Supreme Court has 22 recently emphasized, property fraud statutes (including the mail and wire fraud statutes) are 23 “limited in scope to the protection of property rights” and so “prohibit[] only deceptive ‘schemes 24 to deprive [the victim of] money or property.’” Kelly v. United States, 140 S. Ct. 1565, 1571 25 (2020) (quoting McNally v. United States, 483 U.S. 350, 360, 356 (1987)). 26 Defendants’ only objection to the mail and wire fraud allegations is that they fail to satisfy 27 Rule 9(b)’s heightened pleading standard for fraud. See Motion at 14. This contention is again 1 Opp’n at 6; Order at 12. The Court found that Ms. Metaxas alleged with particularity the “specific 2 defendants [who] signed off on false reports,” “the exact months those false reports were 3 submitted,” the locations from which the reports were sent, and the reasons “why the statements 4 were misleading.” Id. at 12-13. As Defendants simply “rehash arguments the court had 5 previously rejected,” O’Connor v. Uber Techs., Inc., 58 F. Supp. 3d 989, 996 n.3 (N.D. Cal. 6 2014), it follows that “Ms. Metaxas sufficiently alleges the who, when, where, and why required 7 by Rule 9(b),” Order at 13.4 8 In its earlier ruling, the Court also found that Ms. Metaxas failed to satisfy the mail/wire 9 fraud requirement that “a defendant must act with the intent . . . to deprive a victim of money or 10 property by means of [his] deceptions.” Order at 13 (quoting Miller, 953 F.3d at 1101). The 11 original complaint alleged that Defendants “misled federal regulators as to Gateway’s financial 12 condition” but not that “these false statements somehow ‘deprive[d] [them] of money or 13 property.’” Id. (quoting Miller, 953 F.3d at 1101). In the FAC, Ms. Metaxas seeks to cure this 14 defect by arguing at length that Defendants’ false statements were made “with the intent to obtain 15 lower FDIC premium charges for GATEWAY than would have been charged by the FDIC had 16 they accurately reported GATEWAY’S core capital by truthfully reflecting the bank’s SERP 17 liability to Plaintiff.”5 FAC ¶ 96. Ms. Metaxas alleges that from 2012 to 2018, Defendants’ 18 misstatements to the FDIC saved Gateway “over $2.5 Million dollars in premiums,” id. ¶ 96 19 (though she does not explain how she arrived at this figure). 20 Defendants do not appear to dispute that these allegations satisfy the money-or-property 21 requirement of §§ 1341 and 1343. And the FAC offers a wealth of detail describing how, e.g., the 22 4 Defendants contend that Gateway’s statements to federal regulators “were not false as Gateway 23 had no existing liability to Plaintiff’s SERP Plan.” Mot. at 14. They therefore seem to be arguing that there was no “scheme to defraud” or “specific intent to defraud” under §§ 1341 and 1343 24 because Defendants’ actions were perfectly lawful, a claim that they develop more fully elsewhere in their briefs. See infra. But Ms. Metaxas’s allegations that Defendants “falsely report[ed] 25 Gateway’s inflated assets” to regulators “in order to obtain lower premiums and fee charges” sufficiently plead the intent elements of mail and wire fraud, particularly since on a motion to 26 dismiss a plaintiff’s factual allegations are assumed to be true. See Opp’n at 7. 27 5 Ms. Metaxas makes a similar claim with respect to the “regulated bank fees” charged by 1 FDIC calculates the insurance premiums it charges banks on a quarterly basis. See FAC ¶ 95. 2 Assuming the truth of Ms. Metaxas’s assertions, it seems plausible that Gateway’s claims to have 3 some $1.24 million in extra capital would reduce the bank’s obligations to the FDIC and 4 OTS/OCC and thus deprived them of money to which they were entitled. Since Defendants fail to 5 contest the sufficiency of Ms. Metaxas’s allegations on this issue, the Court concludes that she has 6 adequately pled the predicate acts of mail and wire fraud. 7 b. Bank Fraud 8 The parties devote a good deal of space to Ms. Metaxas’s allegation that Defendants 9 committed bank fraud in violation of 18 U.S.C. § 1344. Section 1344 makes it a crime knowingly 10 “(1) to defraud a financial institution; or (2) to obtain any of the moneys, funds, credits, assets, 11 securities, or other property owned by, or under the custody or control of, a financial institution, 12 by means of false or fraudulent pretenses, representations, or promises.” Ms. Metaxas argues that 13 Defendants violated § 1344—without specifying which subsection—“[b]y misrepresenting to the 14 [Gateway] Board and SERP Administrative Committee the true known facts concerning Plaintiff’s 15 disability and its materiality to her right to accrued SERP benefits.” Opp’n at 12 (citing FAC ¶¶ 16 98-99); FAC ¶ 123. Defendants thereby “deceived the Bank, putting it at risk of litigation by 17 Plaintiff over her SERP benefit, which risk has now come to pass”; put differently, they “deprived 18 the Bank of an informed decision by its Board and/or SERP Administrative Committee as to the 19 risks involved in denying Plaintiff her right to benefits.” Id. 20 Defendants respond by arguing, inter alia, that Ms. Metaxas’s allegations “are contradicted 21 by [her] guilty plea and therefore barred by the doctrine of collateral estoppel,” Mot. at 15, and 22 that “only a financial institution [has] standing” to “allege bank fraud as a predicate act for RICO 23 purposes,” id. at 16.6 24 These issues are largely beside the point, however, as Ms. Metaxas has failed to show how 25 Defendants’ purported scheme to commit bank fraud deprived Gateway of any property interest. 26 As described above, she alleges that Defendants “deceived the Bank” by lying about Ms. 27 1 Metaxas’s disability (and therefore her eligibility for SERP benefits). But she claims only that this 2 deception put Gateway at a heightened risk of eventual litigation with Ms. Metaxas or, 3 alternatively, that it “deprived the Bank of an informed decision” as to this litigation risk. As 4 Defendants point out, “such an informed decision . . . is obviously not property under custody or 5 control of” Gateway. Reply at 6-7. Ms. Metaxas’s allegations therefore fail to satisfy the plain 6 terms of § 1344(2). And it likewise fails to satisfy § 1344(1), as that provision also requires a 7 scheme “to obtain property belonging to [a] bank.” See Shaw v. United States, 137 S. Ct. 462, 469 8 (2016); see also Kelly, 140 S. Ct. at 1571 (reiterating that property fraud statutes apply only to 9 “schemes to deprive [the victim of] money or property”). Ms. Metaxas does not allege as much in 10 the FAC, nor does she cite any authority for the principle that undermining a bank’s ability to 11 make an “informed decision” creates liability under § 1344. And “because the abstracted funds 12 were allegedly used by Gateway itself” as part of Defendants’ broader scheme, Reply at 8, it is 13 particularly unclear how the bank was deprived of money or property. 14 Ms. Metaxas’s bank fraud claim therefore cannot serve as a predicate act under RICO. 15 c. Money Laundering 16 The parties also dispute whether Ms. Metaxas has adequately alleged money laundering 17 offenses under 18 U.S.C. §§ 1956 and 1957. The gravamen of Ms. Metaxas’s claim is that 18 “Defendants knew that the [SERP] funds were proceeds of an unlawful abstraction yet used the 19 abstracted funds to pay regular compensation expenses to disguise the nature or source of those 20 funds.” Opp’n at 17 (citing FAC ¶¶ 122-23). 21 To plead a violation of § 1956, a plaintiff must allege that the defendant “(1) engaged in a 22 financial transaction which involved proceeds from specified illegal activity, (2) knew the 23 proceeds were from illegal activity, and (3) intended the transaction either to promote the illegal 24 activity or to conceal the nature, source, or ownership of the illegal proceeds.” United States v. 25 Marbella, 73 F.3d 1508, 1514 (9th Cir. 1996). Section 1957, in contrast, requires a plaintiff to 26 show that “(1) the defendant knowingly engaged in a monetary transaction; (2) he knew the 27 transaction involved criminal property; (3) the property's value exceeded $10,000; and (4) the 1 1229 (9th Cir. 2003). 2 Beyond paraphrasing the language of §§ 1956 and 1957, the only factual allegation of 3 money laundering that Ms. Metaxas adduces comes from ¶ 123(b)(2) of her complaint: “Sometime 4 in March or April of 2010, Defendant Green transferred funds held in GATEWAY’S SERP 5 account representing reserves for pension fund liabilities on Plaintiff’s SERP PLAN to 6 GATEWAY’s Compensation account, and thereafter used the proceeds from the abstraction of the 7 SERP funds to pay regular compensation expenses of GATEWAY . . . .” See Opp’n at 16-17. 8 Defendants focus, inter alia, on the heightened pleading requirements for money- 9 laundering claims under Rule 9(b), Mot. at 17, and Ms. Metaxas questions the applicability of 10 Rule 9(b) to such claims, Opp’n at 15-16. Defendants’ essential point, though, is that the FAC has 11 not adequately alleged “that Defendants knew the proceeds/transactions involved illegal 12 activities.” Reply at 10. Regarding § 1956, they argue that Ms. Metaxas fails to explain “how the 13 transfer or use of the SERP funds was intended . . . [to] disguise the nature of the proceeds of the 14 abstraction.” Mot. at 17-18. They further argue that while § 1957 lacks the intent-to-conceal 15 requirement of § 1956, Ms. Metaxas’s mere allegation “that Defendants made a transfer to 16 Gateway’s compensation account from which Gateway’s employees were paid” does not indicate 17 any knowledge of the transfer’s illegality. Reply at 10-11; Opp’n at 18 (citing FAC ¶ 80). 18 Assuming that the FAC “sufficiently alleges the who, when, where, and why required by 19 Rule 9(b),” Order at 13, Ms. Metaxas nevertheless fails to allege facts showing how Defendants 20 used “the abstracted funds to pay regular compensation expenses” in such a way that they 21 “disguise[d] the nature or source of those funds.” See Opp’n at 17. Defendants contend that there 22 was no segregated account for the SERP benefits, as they would have been paid out of the bank’s 23 general funds. See infra; see also Mot. at 18-19 (arguing that Metaxas “alleges nothing more than 24 that the general asset funds that could have been used to pay her SERP benefits were instead used 25 for payroll,” and that this lawful activity cannot form the basis of money laundering allegations). 26 “[W]here a defendant takes no steps to disguise or conceal the source or destination of [allegedly 27 laundered] funds, leaving an easy-to-follow trail in moving money around,” the “transactions 1 Wilkes, 662 F.3d 524, 545 (9th Cir. 2011) (internal quotations omitted); see also United States v. 2 Adefehinti, 510 F.3d 319, 322 (D.C. Cir. 2007) (“The money laundering statute criminalizes 3 behavior that masks the relationship between an individual and his illegally obtained proceeds; it 4 has no application to the transparent division or deposit of those proceeds.”); Mocha Mill, Inc. v. 5 Port of Mokha, Inc., No. 18-cv-02539-HSG, 2019 WL 1048252, at *10 (N.D. Cal. Mar. 5, 2019) 6 (rejecting theory “that by committing fraud in the past, Defendants acquired criminal proceeds” 7 and “because every transaction [of Defendants’ company] is infected by the past fraud, each such 8 transaction constitutes money laundering.”). 9 Ms. Metaxas thus fails to show that Defendants engaged in the predicate act of money 10 laundering under § 1956. Her related claim under § 1957 presents a closer question. The 11 conclusory nature of her allegations (i.e., that “Defendants knew that the [SERP] funds were 12 proceeds of an unlawful abstraction,” Opp’n at 17) and the fact that the allegations are dependent 13 on her questionable abstraction claim, see infra, raise serious doubts over whether the § 1957 14 claim is adequately pled. As the Court ultimately resolves this motion on other grounds, however, 15 it assumes, arguendo, that Ms. Metaxas has sufficiently alleged a violation of § 1957 as a RICO 16 predicate act. 17 d. Abstraction 18 As in her original complaint, Ms. Metaxas argues that Defendants Green, Fentriss, and 19 Wang “intentionally interfered with [her] right to receive benefits under the SERP and falsely 20 eliminated GATEWAY’s SERP PLAN liability of $1,236,448.04 as of March 31, 2010, thereby 21 committing a violation of 18 U.S.C. § 664.” FAC ¶ 78. Under § 664, “[a]ny person who . . . 22 willfully abstracts or converts to his own use or to the use of another, any of the moneys, funds, 23 securities, premiums, credits, property, or other assets of any . . . employee pension benefit plan” 24 is liable for abstraction. 25 In its earlier order, the Court found that Ms. Metaxas had adequately alleged a violation of 26 § 664, Order at 16, and the FAC appears to include additional details supporting her claim. Ms. 27 Metaxas also points out that “the Court had the SERP Plan before it as an exhibit to the original 1 841 F. Supp. 2d 1070 (C.D. Cal. 2011), in their earlier motion to dismiss (though for different 2 purposes). Opp’n at 18; Docket 22 at 25. Ms. Metaxas’s argument that Defendants’ challenge to 3 the adequacy of her abstraction allegations “is yet another attempt to seek reconsideration of the 4 Court’s prior rulings” therefore carries some weight. Id. 5 At the same time, the earlier order noted that Defendants did not challenge the adequacy of 6 the abstraction allegations in their first motion to dismiss. Order at 16. Here, they do. Citing 7 specific language in Ms. Metaxas’s SERP agreement with Gateway, FAC Ex. A § 10.1, 8 Defendants argue that the SERP “is an unfunded top hat plan.” Mot. at 19 (emphasis in original). 9 Payment under such a plan comes “only from the company’s general assets,” and plan participants 10 “have no secured interest in any of the monies in the plan” and no “cognizable property interest” 11 in those monies. Id. (quoting Hill, 841 F. Supp. 2d at 1090-91, 1093); see also id. (quoting 12 additional SERP language stating that “all of [Gateway’s] assets and policies shall be, and remain, 13 the general, unpledged, unrestricted assets of [Gateway]”). Ms. Metaxas thus fails to plead 14 abstraction, Defendants argue, because “she alleges nothing more than that the general asset funds 15 that could have been used to pay her SERP benefits were instead used for” other legitimate 16 purposes. Id. 17 Ms. Metaxas counters that the allegedly abstracted SERP funds were not part of the bank’s 18 general assets but were “segregated” in a separate account before “Defendants . . . transferred 19 [them] to the compensation [expense] account.” Opp’n at 20 (citing FAC ¶ 80). Additionally, 20 Ms. Metaxas argues that the SERP differs from the top hat plan in Hill in important ways. For 21 example, whereas “the contributions to the [Hill] plan were to come from the employer,” here “the 22 SERP was funded from [Metaxas’s] compensation” and a life insurance policy purchased 23 specifically for that purpose. Id. at 19 (citing FAC ¶¶ 45-46). Ms. Metaxas also cites to United 24 States v. Grizzle, 933 F.2d 943 (11th Cir. 1991), which held that contributions “directly taken from 25 the property of . . . individual employees,” i.e., from wages to which they were entitled, “could 26 serve as the basis of an embezzlement conviction under 18 U.S.C. § 664.” Opp’n at 19-20; see 27 also Hill, 841 F. Supp. 2d at 1094 (distinguishing Grizzle, 933 F.2d at 946). Lastly, Ms. Metaxas 1 the SERP still “constituted a contract between [her] and Gateway” such that Defendants’ 2 abstraction “interfered with her contract for SERP benefits.” Opp’n at 20. And because the 3 “Ninth Circuit recognizes interference with contract as . . . an injury to a ‘property’ interest under 4 RICO,” the FAC “properly alleges abstraction of the SERP liability as a predicate act.” Id. at 21 5 (citing Diaz, 420 F.3d at 902). 6 While the issue is a close one, the Court again assumes, arguendo, that Ms. Metaxas has 7 made out a plausible claim at the pleading stage. To be sure, Defendants quote language in the 8 SERP suggesting that it is indeed a top hat plan: it was “intended to be an unfunded plan” whose 9 beneficiaries would have “no legal or equitable rights, claims or interests” in Gateway’s general 10 assets. Mot. at 19 (quoting FAC Ex. A §§ 10.1-10.2). Defendants also point to Hill’s holding that 11 participants in such a plan have no cognizable property interest that would allow them to state a 12 claim under RICO. See 841 F. Supp. 2d at 1089-95. And they note that courts “are not required 13 to accept as true conclusory allegations which are contradicted by documents referred to in the 14 complaint.” See Reply at 12; see also, e.g., Wright v. Or. Metallurgical Corp., 360 F.3d 1090, 15 1096 (9th Cir. 2004) (quoted above). Nevertheless, Ms. Metaxas’s factual allegations and her 16 recitation of out-of-circuit authority create some uncertainty about the mechanics of the SERP,7 17 and so the Court will assume, arguendo, that she states a plausible claim of abstraction as a 18 predicate act under RICO. 19 D. Pattern of Racketeering Activity 20 Assuming Ms. Metaxas has stated a plausible claim of two predicate acts, the question 21 remains whether Ms. Metaxas has adequately alleged a “pattern” of racketeering activity, as 22 mandated by 18 U.S.C. § 1962(c). The pattern element requires, as a threshold matter, that there 23 “be at least two acts of racketeering activity within ten years of one another.” Id.; see also 18 24 U.S.C. § 1961(5). “A ‘pattern’ of racketeering activity also requires proof [1] that the racketeering 25 predicates are related and [2] ‘that they amount to or pose a threat of continued criminal activity.’” 26 7 For example, there is some question about whether the plan was funded or not given Ms. 27 Metaxas’s allegation that “the SERP was funded from [her] compensation.” Opp’n at 19; see also 1 Turner, 362 F.3d at 1229 (quoting H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 239 (1989)). 2 Predicate acts are related if they have “the same or similar purposes, results, participants, victims, 3 or methods of commission, or otherwise are interrelated by distinguishing characteristics and are 4 not isolated events.” H.J. Inc., 492 U.S. at 240. The parties do not dispute that the predicate acts 5 alleged by Ms. Metaxas are related within the meaning of RICO. 6 As the Ninth Circuit explains, the continuity requirement aims “at eliminating RICO 7 actions against perpetrators of isolated or sporadic acts.” Sun Sav. and Loan Ass’n v. Dierdorff, 8 825 F.2d 187, 193 (9th Cir. 1987). The essential question in determining whether the continuity 9 requirement is met is “whether the [predicate] acts pose[ ] a threat of continuing activity.” Id. at 10 194. Continuity has been interpreted as encompassing “both a closed- and open-ended concept,” 11 H.J. Inc., 492 U.S. at 241, and a plaintiff can satisfy the requirement “either by pleading ‘closed- 12 ended continuity’ or by pleading ‘open-ended continuity,’” Allwaste, Inc. v. Hecht, 65 F.3d 1523, 13 1526 (9th Cir. 1995). Closed-ended continuity entails “a series of related predicates extending 14 over a substantial period of time,” i.e., more than “a few weeks or months.” H.J. Inc., 492 U.S. at 15 241. Open-ended continuity involves “past conduct that by its nature projects into the future with 16 a threat of repetition.” Id. Courts analyze both closed-ended and open-ended continuity on a fact- 17 specific basis. See id. at 242 (“Whether the predicates proved establish a threat of continued 18 racketeering activity depends on the specific facts of each case.”) While duration is an important 19 factor in determining whether closed-ended continuity is satisfied, the Ninth Circuit has described 20 the “substantial period of time” requirement as a “flexible concept” and declined to adopt bright- 21 line rules based on the temporal length of a scheme. See Allwaste, 65 F.3d at 1528. Courts also 22 consider additional factors, such as the number of predicate acts, victims, and injuries, to assess 23 whether the plaintiff has demonstrated closed-ended continuity. See Midwest Grinding Co. v. 24 Spitz, 976 F.2d 1016, 1023-24 (7th Cir. 1992). Thus, when a plaintiff alleges only a single scheme 25 with a single victim it cuts against a finding of both closed-ended as well as open-ended 26 continuity. See Religious Tech. Ctr. v. Wollersheim, 971 F.2d 364, 365-67 (9th Cir. 1992). 27 Particularly in the context of open-ended continuity, a criminal scheme with a singular goal poses 1 In its prior order, the Court ruled that Ms. Metaxas had failed to satisfy the predicate act 2 requirement in her original complaint because she “successfully alleged only one predicate act, 3 abstraction from a pension fund.” Order at 17. Defendants argue here that the FAC has not 4 meaningfully changed Ms. Metaxas’s theory of the case, which the Court previously described as 5 “a single scheme (to unlawfully deny her retirement benefits) with a single victim (herself).” Id. at 6 18. Notably, the Court’s continuity analysis assumed, arguendo, that Ms. Metaxas had adequately 7 pled predicate acts of mail and wire fraud in addition to abstraction. Id. at 17. It nevertheless 8 concluded that she “ha[d] not demonstrated continuity” because Defendants’ false statements to 9 regulators were “the inevitable consequence, or at most cover-up, of the completed criminal 10 scheme.” Id. at 17-18. While Ms. Metaxas has amended her mail and wire fraud claims by 11 identifying the regulatory agencies, rather than Ms. Metaxas herself, as the principal victim of 12 Defendants’ misrepresentations,8 Defendants contend that the regulators remain “merely inevitable 13 players” in a circumscribed scheme ultimately focusing on Ms. Metaxas and her SERP benefits. 14 Mot. at 21; see also Reply at 12-14. 15 Ms. Metaxas responds that the FAC sufficiently pleads additional predicate acts related to 16 her successful abstraction claim, and that the FAC alleges both open-ended and closed-ended 17 continuity. It establishes open-ended continuity, she argues, because Defendants’ “false quarterly 18 reports omitting the SERP liability” to the FDIC and OTS/OCC “continue to be made to this day.” 19 Opp’n at 24. The FAC pleads closed-ended continuity because it alleges “dozens of related 20 predicate acts, multiple victims, and multiple injuries arising from a scheme extending from 2010 21 to the present day.”9 Id. 22 8 See, e.g., FAC ¶ 12: “From learning these facts Plaintiff was first put on notice that: (a) since 23 2010 Defendants had been making false statements about GATEWAY’s financial condition and capital to the FDIC and OTS/OCC; (b) Defendants were doing so with the intent to defraud the 24 FDIC and regulatory agencies into charging GATEWAY lower deposit insurance premiums and lower regulatory fees, and that denying GATEWAY’s SERP liability to Plaintiff was integral to, 25 and necessitated by, Defendants [sic] ongoing practice of misrepresenting the bank’s financial condition to federal regulators.” 26 9 Specifically, given that the “mailing/wiring of false and misleading information to the FDIC and 27 the OCC/OTS induced lower charges to Gateway on a quarterly basis (for the FDIC) and a bi- 1 The Court concludes that the fundamental character of Ms. Metaxas’s claims has not 2 changed since the Court dismissed her original complaint. Even though the FAC seeks to 3 recharacterize the regulators as the primary targets of Defendants’ scheme, it remains the case that 4 without the targeted abstraction of Ms. Metaxas’s SERP benefits none of the other predicate acts 5 would have occurred (at least not in the manner alleged). Notably, in the section of her opposition 6 brief arguing that the FAC has satisfied RICO’s pattern requirement, Ms. Metaxas offers the 7 following account: 8 Plaintiff has alleged an ongoing scheme to operate Gateway as a racketeering enterprise. One of the predicate acts was the April 9 2010 abstraction by Defendants Green, Wang, and Fentriss of the funds identified by Gateway as funding its SERP liability (18 U.S.C. 10 § 664). Then, in violation of 18 U.S.C. 1956 and 1957 [sic], the same defendants plus Defendant Cheung transferred the funds freed 11 up by the abstraction of the SERP liability to the Bank’s compensation account and obscured the provenance of the funds by 12 using them to pay general compensation expenses. 13 All six defendants were responsible for acts of mail and wire fraud (18 U.S.C. §§ 1341, 1343) consisting of the filing by Gateway 14 every quarter of false and misleading financial reports calculated to deceive the FDIC and OTS/OCC into charging Gateway lower 15 insurance premiums and regulatory fees due to the inflated core assets resulting from the omission of the SERP liability. As these 16 violations occurred on a quarterly basis, each Defendant is chargeable for the number of false and misleading filings over the 17 number of quarters they were an officer and director of Gateway. 18 Finally, the FAC alleges two acts constituting bank fraud under 18 U.S.C. § 1344. These occurred in February of 2016 and 19 were committed by Defendants Keefe and Lee. 20 Opp’n at 24 (emphasis added). As Ms. Metaxas explains Defendants’ scheme, the denial of her 21 retirement benefits continues to supply the means for, and constitutes the but for cause of, 22 Defendants’ other acts. The additional instances of racketeering activity that Defendants 23 purportedly committed are ancillary to what remains “a single scheme with a single victim,” as the 24 Court previously held. Order at 17 (citing Religious Tech. Ctr., 971 F.2d at 365-67).10 25 targets.” Id. 26 10 To be sure, the FAC contains scattered references to other instances of Defendants’ wrongdoing, 27 including two other transactions that it accuses Defendants of misreporting in financial reports, 1 In particular, while the FAC’s allegations of mail and wire fraud are more detailed than 2 those in Ms. Metaxas’s original complaint, Defendants’ false reports to regulators continue to 3 be—even in Ms. Metaxas’s own account—“the inevitable consequence, or at most cover-up,” id. 4 at 18, of the scheme to deprive Ms. Metaxas of her SERP benefits. This conclusion is underscored 5 by the highly contingent nature of Ms. Metaxas’s mail and wire fraud allegations, which, in order 6 to succeed on the merits, would require a finding that Defendants did in fact wrongfully abstract 7 her retirement benefits. Put another way, if Defendants were not actually liable to Ms. Metaxas 8 under the SERP when they appropriated the retirement funds, then they did not commit fraud in 9 reporting those funds as general assets in subsequent reports to the regulatory agencies. Moreover, 10 any fraud in reporting would cease upon resolution of the SERP benefits dispute: if Defendants are 11 eventually judged liable to Ms. Metaxas for the SERP payments, e.g., in the related ERISA action, 12 then Defendants’ fraudulent reporting will presumably cease, with Ms. Metaxas receiving her 13 previously withheld benefits. If Defendants were to prevails on the merits of the ERISA action 14 there would be no fraud or abstraction.11 15 Defendants’ conduct does not “amount to or pose a threat of continued criminal activity.’” 16 Turner, 362 F.3d at 1229 (quoting H.J. Inc., 492 U.S. at 239); see also Concorde Equity II, LLC v. 17 Miller, 732 F. Supp. 2d 990, 999 (N.D. Cal. 2010) (“[T]he fact that Defendants continue to reap 18 the benefits of their alleged illegal activity and/or that . . . [Plaintiff] continues to suffer the effects 19 thereof, is of no import to the Court’s ‘continuity’ determination.”). It does not establish open- 20 ended continuity because, for the reasons just given, it does not “project[ ] into the future with a 21 22 purported abstraction of Ms. Metaxas’s SERP benefits or to the Round-Trip Transaction itself. (It is not clear, for example, how Defendants managed, in Ms. Metaxas’s telling, to defraud their 23 biggest customer out of more than $5.6 million through a bogus loan for $3.8 million.) More importantly, Ms. Metaxas does not refer to these additional predicate acts of mail and wire fraud 24 anywhere in her opposition brief, which is focused almost exclusively on the SERP abstraction and acts flowing from it. 25 11 At the hearing on the motion to dismiss, counsel for Ms. Metaxas argued that even if the 26 abstraction were ultimately judged lawful, Defendants’ alleged violation of Generally Accepted Accounting Principles in removing the potential liability to Ms. Metaxas from its books amounts 27 to a predicate act of mail/wire fraud. Ms. Metaxas also raised this argument—for the first time— 1 threat of repetition.” H.J. Inc., 492 U.S. at 241. It also does not establish closed-ended continuity 2 because Defendants’ scheme targeted only one victim, Ms. Metaxas herself, with the regulatory 3 agencies at most the merely incidental victims of the scheme. See Midwest Grinding Co. 976 F.2d 4 at 1023-24. And while the number of Defendants’ alleged predicate acts has been increased by the 5 FAC, all of the purported acts were a part of, and dependent upon, the core act of extracting her 6 SERP benefits. In general, it is difficult to discern a “pattern” of criminal activity where the 7 alleged conduct derives from a single wrong directed at a single victim. The case at bar contrasts 8 with paradigmatic RICO cases involving multiple acts against multiple victims. See, e.g., H.J. 9 Inc., 492 U.S. at 249-50 (holding that various plaintiff-victims alleged a pattern of racketeering 10 activity against defendants who paid and received “numerous bribes, in several different forms,” 11 “over at least a 6-year period”); Allwaste, 65 F.3d at 1529 (ruling that pattern requirement was 12 satisfied where defendants demanded kickbacks from four victims and where “there [was] nothing 13 to suggest that they would have ceased” because the scheme was “not connected to the 14 consummation of any particular transaction”). 15 In its previous order, the Court properly analogized this case to the Eleventh Circuit’s 16 decision in Aldridge v. Lily-Tulip, Inc. Salary Retirement Plan Benefits Committee, refusing to 17 find continuity. See Order at 18-19 (discussing Aldridge, 953 F.2d 587 (11th Cir. 1992)). Its 18 conclusion here is also consistent with caselaw from the Ninth Circuit and this District. In 19 Medallion Television Enterprises, Inc. v. SelecTV of California, Inc., the plaintiff brought RICO 20 claims against a joint venturer after their agreement to broadcast a boxing match fell through; the 21 plaintiff alleged that the defendant committed several acts of, inter alia, mail and wire fraud by 22 misrepresenting the number of commitments it had received from television stations to air the 23 match, and so had engaged in a pattern of racketeering activity. 833 F.2d 1360, 1361-62 (9th Cir. 24 1987). Although the Ninth Circuit recognized that the plaintiff had adequately alleged more than 25 two predicate acts, id. at 1362, it held that continuity was absent because the defendant’s 26 misrepresentations were merely “parts of its single effort to induce [the plaintiff] to form the joint 27 venture,” id. at 1364. Since the case ultimately “involved but a single alleged fraud with a single 1 Pulp Corp., 978 F.2d 1529, 1535-36 (9th Cir. 1992) (denying continuity where plaintiff alleged 2 numerous predicate acts but defendant’s conduct amounted to “a single episode having the 3 singular purpose of impoverishing [the plaintiff]”); cf. Sun Sav. and Loan Ass’n, 825 F.2d at 192- 4 94 (finding continuity where defendant committed predicate acts of mail fraud “because they 5 covered up a whole series of alleged kickbacks and receipts of favors, occurred over several 6 months, and in no way completed the criminal scheme”). 7 Likewise, in Royce International Broadcasting Corp. v. Field, this court held that the 8 plaintiff failed to plead continuity where it alleged that the defendant committed several acts of 9 mail and wire fraud to mislead it into selling a radio station. No. 99-cv-04169, 2000 WL 236434, 10 at *1-2 (N.D. Cal. Feb. 23, 2000). The court noted that the plaintiff’s allegations “may state a 11 claim for fraudulent inducement to enter a single contract,” but could not establish a “pattern of 12 racketeering activity.” Id. at *3. Such contract and fraud claims, the court concluded, “are not the 13 types of activities that RICO was intended to eliminate” and a contrary ruling would “permit[ ] all 14 allegations of broken promises in failed business transactions to constitute racketeering activity.” 15 Id. at *4 (internal quotations omitted). 16 As noted in the Court’s previous order, if Defendants’ efforts to conceal their original 17 abstraction could be parlayed by Ms. Metaxas into creating RICO liability, then “every transaction 18 could turn into a ‘multiple scheme’” and “every run-of-the-mill fraud case that belongs in state 19 court” would be transformed into a federal claim. Order at 19 (quoting, e.g., Midwest Grinding 20 Co. v. Spitz, 976 F.2d 1016, 1025 (7th Cir. 1992)). Having previously “decline[d] to adopt such 21 an expansive interpretation of civil RICO,” id., the Court does so again here. 22 As Ms. Metaxas has failed to show that Defendants’ conduct threatens continued criminal 23 activity, the Court holds that she has failed to state a RICO claim under § 1962(c). It therefore 24 GRANTS Defendants’ motion as to this claim. 25 E. Causation 26 Defendants argue in their reply brief that Ms. Metaxas fails to satisfy RICO’s causation 27 element under § 1964(c). The Supreme Court has held that a civil RICO plaintiff must “show that 1 as well.” Hemi Grp., LLC v. City of New York, 559 U.S. 1, 9 (2010) (internal quotation omitted). 2 Proximate causation requires that there be “a direct relationship between the injury asserted and 3 the injurious conduct alleged.” Imagineering, Inc. v. Kiewit Pac. Co., 976 F.2d 1303, 1311 (9th 4 Cir. 1992) (citing Holmes v. Sec. Inv’r Prot. Corp., 503 U.S. 258, 268 (1992)). Defendants assert 5 that the FAC does not connect Ms. Metaxas’s injuries to the predicate acts of mail/wire fraud and 6 money laundering. Reply at 14. 7 In its prior order, the Court found that Ms. Metaxas had “adequately alleged both but-for 8 and proximate causation.” Order at 20. It based this finding on her abstraction claim, as “[i]t is 9 hard to see how the abstraction of Ms. Metaxas’s SERP benefits did not lead directly to the loss of 10 those benefits.” Id. at 20-21. And while the other predicate acts she alleged bore “a less obvious 11 connection” to her injury, the Court reasoned that RICO plaintiffs “are not required to show that 12 each individual predicate act caused them an injury, but rather that the pattern of racketeering 13 activity did.” Id. at 21 (quoting Just Film, Inc. v. Merchant Servs., Inc., No. 10-cv-01993-CW, 14 2012 WL 6087210, at *12 (N.D. Cal. Dec. 6, 2012)). 15 The Court notes that there is some debate whether courts should evaluate causation by 16 reference to the pattern of alleged racketeering activity as a whole or to each individual predicate 17 act. Compare Just Film, Inc., 2012 WL 6087210, at *12 (citing cases from the Seventh and 18 Eighth Circuits for the principle that plaintiffs need not “plead or prove that they were harmed by 19 each predicate act alleged”) with Hill, 841 F. Supp. 2d at 1097-1102 (analyzing plaintiffs’ bank 20 fraud allegations separately from their mail/wire fraud and embezzlement allegations). 21 The Court need not decide this issue given Ms. Metaxas’s failure to otherwise plead a 22 viable RICO claim. 23 F. Conspiracy 24 To state a claim for RICO conspiracy under § 1962(d), plaintiffs must sufficiently allege a 25 substantive violation of the Act under subsections (a), (b), or (c). See, e.g., Sanford v. 26 MemberWorks, Inc., 625 F.3d 550, 559 (9th Cir. 2010) (“Plaintiffs cannot claim that a conspiracy 27 to violate RICO existed if they do not adequately plead a substantive violation of RICO.”). 1 § 1962(c), the Court GRANTS Defendants’ motion to dismiss her conspiracy claim under 2 § 1962(d), as well. 3 G. Leave to Amend 4 If a court dismisses a complaint for failure to state a claim, it should “freely give leave [to 5 amend] when justice so requires.” Fed. R. Civ. P. 15(a)(2). A court nevertheless has discretion to 6 deny leave to amend based on “undue delay, bad faith or dilatory motive on the part of the 7 movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice 8 to the opposing party by virtue of allowance of the amendment, [and] futility of amendment.” 9 Leadsinger, Inc. v. BMG Music Pub., 512 F.3d 522, 532 (9th Cir. 2008) (citing Foman v. Davis, 10 371 U.S. 178, 182 (1962)). 11 Ms. Metaxas requests that the Court grant her leave to amend if it finds that the FAC fails 12 to state a claim for relief. Opp’n at 3 n.1. But the Court has already provided Ms. Metaxas with 13 an opportunity to amend. It will not do so again, particularly given what the Court previously 14 indicated in its earlier order—that this case entails only “a single garden-variety fraud or a 15 violation of [ERISA]” and that Ms. Metaxas would be better served “suing for breach of contract 16 or denial of ERISA benefits.” Ms. Metaxas has, in fact, pursued an ERISA claim in the related 17 action now before the Court. See Concorde Equity II, LLC, 732 F. Supp. 2d at 999 (denying leave 18 to amend where plaintiff “had previously filed an amended complaint”). 19 V. CONCLUSION 20 For the reasons given above, the Court GRANTS Defendants’ motion to dismiss the 21 claims asserted in Ms. Metaxas’s FAC with prejudice. The Clerk is instructed to enter judgment 22 and close the file. 23 This order disposes of Docket No. 57. 24 IT IS SO ORDERED. 25 26 Dated: November 30, 2020 27 ______________________________________