De Los Angeles Gomez v. Bank of America, N.A.

FILED
NOT FOR PUBLICATION
MAR 02 2016
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
MARIA DE LOS ANGELES GOMEZ; No. 14-55129
JUAN ELIAS GOMEZ; VACHIK Y.
ALVANDI; DOUGLAS ALAN MARKS; D
SHARON MAUREEN MARKS; EVELIN .C. No. 2:12-cv-08704-GHK-SH
YANETH RAFT; ROBERTA BARTECK;
RONALD BARTECK; FRED
SHOKOUFI; LEESHA TAN KELLER; MEMORANDUM*
TADEH KESHMESHIAN; IDET
KESHMESHIAN; CELARIS
ZADORIAN; HERAYR ZAHRABI;
SHARON REUVENI, AKA Shawn
Reuveni; REUVENI REUVENI; DAVID
VALENTINO,
Plaintiffs - Appellants,
v.
BANK OF AMERICA, N.A., a United
States corporation for itself and as
successor in interest for Countrywide Bank
FSB; COUNTRYWIDE HOME LOANS
INC, a New York corporation, DBA
America’s Wholesale Lender; JOHN
PARK,
Defendants - Appellees.
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Appeal from the United States District Court
for the Central District of California
George H. King, Chief District Judge, Presiding
Submitted February 10, 2016**
Pasadena, California
Before: KLEINFELD, McKEOWN, and IKUTA, Circuit Judges.
Plaintiffs sued Bank of America, N.A., successor in interest to Countrywide
Bank, FSB, formerly known as Countrywide Bank N.A., Countrywide Home
Loans, Inc. (the “Bank Defendants”), and several individual defendants, alleging
civil liability for violations of RICO, 18 U.S.C. § 1962(a)–(d), as well as several
state causes of action. Their claims are based on damages Plaintiffs suffered when
they lost a great deal of money in a Ponzi scheme operated by Kaveh Vahedi—a
personal friend to many of the Plaintiffs, and a con-man who promised excellent
investment opportunities before taking Plaintiffs’ money. After giving Plaintiffs
an opportunity to amend their complaint, the district court dismissed their RICO
claims against the Bank Defendants with prejudice for failure to state a claim.
Plaintiffs appeal the district court’s Federal Rule of Civil Procedure 12(b)(6)
dismissal and its denial of leave to amend their RICO claims against the Bank
Defendants. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
2
Despite the injustice done to them by Vahedi, they do not state a RICO claim upon
which relief can be granted against the Bank Defendants.
We review de novo the district court’s judgment granting the motion to
dismiss, Eclectic Props. E., LLC v. Marcus & Millchap Co., 751 F.3d 990, 995
(9th Cir. 2014), and we review its denial of leave to amend for an abuse of
discretion. United States v. Corinthian Colls., 655 F.3d 984, 995 (9th Cir. 2011).
Though we construe the facts in the complaint in the light most favorable to
Plaintiffs, to survive a motion to dismiss under Rule 12(b)(6), Plaintiffs’ complaint
must to set forth “more than labels and conclusions, and a formulaic recitation of
the elements of a cause of action will not do.” Bell Atlantic Corp. v. Twombly,
550 U.S. 544, 555 (2007). In order to sustain their claims, Plaintiffs’ factual
allegations must “state a claim to relief that is plausible on its face.” Id. at 570.
RICO claims are subject to both Federal Rule of Civil Procedure 8(a)’s
requirement of a short and plain statement, and Federal Rule of Civil Procedure
9(b)’s heightened pleading requirement, so Plaintiffs’ complaint must contain
adequate factual allegations to plausibly infer that the Bank Defendants, not just
Vahedi, specifically intended to defraud them. Eclectic Props., 751 F.3d at
3
993–94. Additionally, any claim asserted under 18 U.S.C. § 1964(c), which
permits persons injured by violations of § 1962 to sue for civil remedies, is only
cognizable if the defendant’s alleged violation proximately caused the plaintiffs
injury. Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 461–62 (2006); see also
Rezner v. Bayerische Hypo Und Vereinsbank AG, 630 F.3d 866, 873 (9th Cir.
2010) (holding that in order to state a claim under § 1962(c), the plaintiffs must
show that the defendants’ actions were both a but-for and proximate cause of their
injuries).
Plaintiffs lack standing to sue the Bank Defendants under § 1964. To have
standing, Plaintiffs must plead (1) that their alleged harm qualifies as injury to their
business or property; and (2) that their harm was “by reason of” the RICO
violation, which requires Plaintiffs to establish proximate causation. Canyon Cty.
v. Syngenta Seeds, Inc., 519 F.3d 969, 972 (9th Cir. 2008).
Plaintiffs claim that the Bank Defendants caused their losses in Vahedi’s
Ponzi scheme because Countrywide Home Loans described KGV Investments,
Inc., Vahedi’s company that operated as a licensed mortgage broker, as one of
30,000 “carefully screened” and “carefully selected” nationwide “business
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partners.” This, in turn, allegedly gave Vahedi the aura of credibility Plaintiffs
needed to trust him. These allegations do not connect the alleged racketeering
activities of the Bank Defendants, i.e., mail fraud and wire fraud for sending false
information indicating that KGV had been “carefully screened” and “carefully
selected,” with Plaintiffs’ decisions to take out loans and invest money with
Vahedi. The amended complaint makes clear that Vahedi had Plaintiffs’ trust, and
as a result Plaintiffs put their money, some obtained through loans and some not
borrowed from the Bank Defendants, into Vahedi’s Ponzi scheme and
subsequently lost that money. Plaintiffs cannot overcome their causation problem
with references to fiduciary duties and agency liability.
Plaintiffs have not pleaded facts sufficient to show that the Bank Defendants
owed them a fiduciary duty. “Under California law, a lender does not owe a
borrower or third party any duties beyond those expressed in the loan agreement,
except[] those imposed due to special circumstance.” Resolution Trust Corp. v.
BVS Dev., 42 F.3d 1206, 1214 (9th Cir. 1994) (citing Nymark v. Heart Fed. Sav.
& Loan Ass’n., 283 Cal. Rptr. 53, 56–57 (Cal. Ct. App. 1991)). Special
circumstances include where a lender actively participates in the financed
enterprise, acting beyond the scope of its “conventional role as a mere lender of
5
money.” Nymark, 283 Cal. Rptr. at 56 (citing Wagner v. Benson, 161 Cal. Rptr.
516, 521 (Cal. Ct. App. 1980)). None of Plaintiffs’ allegations suggested that the
Bank Defendants were participating in the financed enterprise—the Bank
Defendants had no ownership interest in Vahedi’s companies, and were not
soliciting Plaintiffs to invest in their own investments. And Plaintiffs cite no fact
for the proposition that selling bundles of mortgages to Wall Street investors was
atypical activity for institutions like the Bank Defendants, or had anything to do
with Vahedi stealing their money.
Plaintiffs’ agency theory does not connect the Bank Defendants with their
financial losses. Even if Vahedi were a dual agent under California law by virtue
of the loan application materials Countrywide Home Loans sent out to some of the
Plaintiffs after they applied for home loans, the Bank Defendants could only be
liable to Plaintiffs for Vahedi’s actions done within the scope of his agency, and
only for actions that were foreseeable from his duties and apparent authority as an
agent of the Bank Defendants. Lisa M. v. Henry Mayo Newhall Mem. Hosp., 48
Cal. Rptr. 2d 510, 512–15 (Cal. 1995); see Cal. Civ. Code § 2338.
6
Plaintiffs’ allegations establish that Vahedi’s apparent authority only
extended to helping the Plaintiffs obtain loans, and advising them about
affordability and repayment, disclosing risks, and assisting them with filling out
the applicable paperwork. Nothing pleaded by Plaintiffs plausibly suggests the
Bank Defendants should have foreseen that Vahedi would use KGV Investments to
obtain Plaintiffs’ money, borrowed or not.
While we recognize a principal may be liable under § 1964 for acts of its
agent that violated § 1962, Brady v. Dairy Fresh Products Co., 974 F.2d 1149,
1154–55 (9th Cir. 1992), that is only true where the agent was acting in the interest
of the principal, as opposed to engaging in racketeering activities that harm the
principal’s interest. Oki Semiconductor Co. v. Wells Fargo Bank, Nat’l Ass’n, 298
F.3d 768, 775 (9th Cir. 2002). Plaintiffs’ own evidence shows Vahedi was acting
against the Bank Defendants’ interests. Plaintiffs attached records from Vahedi’s
criminal conviction for defrauding financial institutions. His plea agreement
admits to defrauding the Bank Defendants by submitting loan applications listing
false assets, income, and occupations. Vahedi has admitted that he was defrauding
the Bank Defendants.
7
To the extent that Plaintiffs suggest that they had distinct mortgage fraud
injuries stemming from Vahedi’s scheme, the district court provided ample
opportunity for Plaintiffs to explain what had prevented them from becoming
aware of these injuries at the time the loan applications were filed and Plaintiffs did
not provide any explanation. Therefore, the district court properly found that
RICO’s four-year statute of limitations had run on any claims stemming directly
from the mortgage fraud. See Pincay v. Andrews, 238 F.3d 1106, 1108–10 (9th
Cir. 2001).
Plaintiffs also failed to adequately plead facts supporting the basic elements
of each of the four RICO causes of action they allege, and dismissal of their claims
was appropriate.
Section 1962(a) provides that it is unlawful “for any person who has
received any income derived, directly or indirectly, from a pattern of racketeering
activity . . . to use or invest . . . any part of such income . . . in . . . operation of . . .
any enterprise.” 18 U.S.C. § 1962(a). To sustain their claim for a violation of §
1962(a), Plaintiffs need to allege facts tending to show they were injured by “the
use or investment of racketeering income,” Nugget Hydroelectric, L.P. v. Pac. Gas
8
and Elec. Co., 981 F.2d 429, 437 (9th Cir. 1992), as opposed to the racketeering
activity itself. Though Plaintiffs pleaded they were harmed by Vahedi’s
investment of their money into various businesses within his scheme,
“[r]einvestment of proceeds from alleged racketeering activity back into the
enterprise to continue its racketeering activity is insufficient to show proximate
causation.” Sybersound Records, Inc. v. UAV Corp., 517 F.3d 1137, 1149 (9th
Cir. 2008). Moreover, nothing pleaded suggests Countrywide invested any
racketeering proceeds.
Section 1962(b) prohibits the use of improper means to acquire or maintain
control over an interest in an enterprise engaged in interstate commerce. 18 U.S.C.
§ 1962(b). Plaintiffs do not plead that the Bank Defendants acquired or maintained
such an enterprise. Plaintiffs being tricked into giving their money to Vahedi was
his, not the Bank Defendants’, improper means. Though Plaintiffs alleged
generally that the Bank Defendants gained control of the alleged RICO enterprise,
they pleaded no facts to plausibly support this claim, or explain how the Bank
Defendants gained such control through racketeering activity, or how Plaintiffs
suffered a distinct injury from the Bank Defendants’ purported control of the
enterprise.
9
Section 1962(c) prohibits a person employed by or associated with any
enterprise engaged in interstate commerce to conduct or participate in the conduct
of the enterprise through a pattern of racketeering activity. 18 U.S.C. § 1962(c).
To state a claim for a violation of § 1962(c), Plaintiffs must plead that the Bank
Defendants participated in (1) the conduct of (2) an enterprise that affected
interstate commerce (3) through a pattern (4) of racketeering activity or collection
of unlawful debt, and the conduct must have been (5) the proximate cause of harm
to the victim. Eclectic Props., 751 F.3d at 997. With respect to the proximate
cause element, we have set forth three non-exhaustive factors to consider:
(1) whether there are more direct victims of the alleged wrongful
conduct who can be counted on to vindicate the law as private
attorneys general; (2) whether it will be difficult to ascertain the
amount of the plaintiff’s damages attributable to defendant’s wrongful
conduct; and (3) whether the courts will have to adopt complicated
rules apportioning damages to obviate the risk of multiple recoveries.
Mendoza v. Zirkle Fruit Co., 301 F.3d 1163, 1168–69 (9th Cir. 2002) (quotations
and citation omitted). “When a court evaluates a RICO claim for proximate
causation, the central question it must ask is whether the alleged violation led
directly to plaintiff's injuries.” Anza, 547 U.S. at 461.
10
The amended complaint reflects that Plaintiffs’ injuries were caused by the
trust they placed in Vahedi and the money they loaned to him on the basis of his
promises. The alleged mail and wire fraud committed by the Bank Defendants,
which indicated to potential borrowers that KGV Investments was a reputable
mortgage broker that Countrywide Home Loans partnered with, could have
influenced some of the Plaintiffs to take out loans on their homes they could not
afford. But the pleadings do not plausibly suggest this necessarily led to their
decision to trust Vahedi with their money. That point is made clear by the fact that
money invested and lost by most, thirteen of the seventeen Plaintiffs victimized by
Vahedi’s Ponzi scheme, did not even come from loans funded by the Bank
Defendants.
Section 1962(d) makes it unlawful to conspire to violate any of the other
three subsections of § 1962. 18 U.S.C. § 1962(d). To state such a claim, the
pleadings must suggest the Bank Defendants were “aware of the essential nature
and scope of the enterprise and intended to participate in it.” Baumer v. Pachl, 8
F.3d 1341, 1346 (9th Cir. 1993) (internal quotation marks and citation omitted).
Though Plaintiffs pleaded that the Bank Defendants were part of Vahedi’s
enterprise and had general knowledge about its purpose, none of their allegations
11
plausibly suggest the Bank Defendants had any knowledge of Vahedi’s Ponzi
scheme or its scope, or that they agreed and intended to participate in it. The facts
pleaded were insufficient to infer a conspiracy existed with the Bank Defendants,
and the district court properly dismissed this claim. See Baumer, 8 F.3d at
1346–47; see also Howard v. Am. Online Inc., 208 F.3d 741, 751 (9th Cir. 2000)
(“Plaintiffs cannot claim that a conspiracy to violate RICO existed if they do not
adequately plead a substantive violation of RICO.”)
Whether to grant leave to amend is in the discretion of the district court.
Foman v. Davis, 371 U.S. 178, 182 (1962). When reviewing the district court’s
decision, we look “to whether the trial court identified and applied the correct legal
rule . . . [and] we look to whether the trial court’s resolution . . . resulted from a
factual finding that was illogical, implausible, or without support in inferences that
may be drawn from the facts in the record.” United States v. Hinkson, 585 F.3d
1247, 1263 (9th Cir. 2009) (en banc). The district court reasonably concluded that
Plaintiffs’ “bloated” amended complaint, which contained seventy more pages than
the original 180 page complaint, failed to remedy the pleading deficiencies
identified in the original complaint, and amendment would be futile. It was
reasonable for the court to determine that Plaintiffs’ 253 page amended complaint
12
contained all the relevant allegations Plaintiffs could make. Even after being
advised of the deficiencies, Plaintiffs still failed to adequately plead that the acts of
the Bank Defendants proximately caused their losses from Vahedi’s Ponzi scheme.
See United Bhd. of Carpenters & Joiners of Am. v. Bldg. & Const. Trades Dep’t,
AFL-CIO, 770 F.3d 834, 845 (9th Cir. 2014). The district court did not abuse its
discretion in denying leave to amend. Id.
AFFIRMED.
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