ORDER GRANTING DEFENDANT JESSICA JACOBSON'S MOTION TO DISMISS; AFFORDING PLAINTIFFS LEAVE TO AMEND; CONTINUING CASE MANAGEMENT CONFERENCE. Should plaintiffs wish to file a second amended complaint, plaintiffs shall file it no later than December 9, 2016. The case management conference is continued to February 17, 2017. Signed by Judge Maxine M. Chesney on 11/23/16. (mmclc2, COURT STAFF) (Filed on 11/23/2016)
RAYAH LEVY, et al.,
Defendants.
United States District Court
Northern District of California
ORDER GRANTING DEFENDANT
JESSICA JACOBSON'S MOTION TO
DISMISS; AFFORDING PLAINTIFFS
LEAVE TO AMEND; CONTINUING
CASE MANAGEMENT CONFERENCE
v.
Case No. 16-cv-03797-MMC
Before the Court is defendant Jessica Jacobson’s (“Jacobson”) motion, filed
September 15, 2016, to dismiss plaintiffs’ amended complaint (“AC”) pursuant to Rule
12(b)(6) of the Federal Rules of Civil Procedure.1 Plaintiffs Leslee A. Nelson, individually
and in her capacity as trustee and trustor of the Leslee A. Nelson Revocable Trust
(“Nelson”), and Nancy Barth (“Barth”) have filed opposition, to which Jacobson has
replied. Having read and considered the papers filed in support of and in opposition to
the motion, the Court rules as follows.BACKGROUND
Defendants Levy and Jacobson “co-founded ArtéQuesta in 2008 with a [stated]
mission to help people make wise decisions for investing in art.” (See AC ¶ 1.) Levy
served as the “Chief Executive Officer” (see id. ¶¶ 10, 12) and Jacobson served as the
On September 30, 2016, defendants Rayah Levy (“Levy”), and Rayah Rachel
Levy International Inc., dba Artéquesta and Agents of Humanity in the Fine Arts, (“Levy
International”) each filed an answer to plaintiffs’ amended complaint.
By order filed October 13, 2016, the Court took the motion under submission.
The following factual allegations are taken from the complaint.
28Page 2
United States District Court
Northern District of California
“Chief Creative Officer . . . until at least the end of 2013” (see id. ¶ 13).
Plaintiff Barth met Levy in 2013. (See id. ¶ 55.) In August 2013, Levy “contacted
Barth multiple times, through e-mail and telephone, during which she urged Barth to
invest with the [d]efendants in art.” (See id. ¶ 57.) Later that same month, Levy “met
with Barth in . . . Jacobson’s personal residence . . . , at which time . . . Barth viewed and
purchased all of the art on display in the premises” (see id. ¶ 60) and, pursuant to Levy’s
instructions, wired $370,000 to a specified Wells Fargo bank account (see id. ¶ 62). On
August 27, 2013, Levy sent Barth “bogus ‘Certificates of Fine Art Evaluation’ – created by
[defendants] – that her investment . . . had tripled in value and was now, just one day
later, worth $1,114,000 at ‘current market value.’” (See id. ¶ 72.) “In the Fall of 2013,
after [defendants] made additional solicitations for Barth to make further investments,”
Barth met with Levy “at Levy’s personal residence . . . , at which time Barth purchased
two additional art works . . . for a total of $50,000.” (See id. ¶ 74). Barth “wired this
money to the previously specified Wells Fargo Account” (see id. ¶ 131), bringing her total
payment to $420,000 in exchange for art which “[d]efendants knew [was] worth no more
than 10 percent of Barth’s purchase price” (see id. ¶ 118).
Plaintiff Nelson “first met Levy in September 2014” (see id. ¶ 50) and, “over the
course of many months, via e-mail and the telephone,” Levy had “numerous
conversations with Nelson” encouraging her to invest in art “through [defendants]” (see
id. ¶ 67). On November 20, 2014, Nelson, pursuant to Levy’s instructions, wired
$300,000 “from the Leslee A. Nelson Revocable Trust” to a specified Wells Fargo bank
account. (See id. ¶ 78). On November 30, 2014, the “[d]efendants (except Jacobson)
presented Nelson with bogus ‘Certificates of Fine Art Evaluation, which were created by
[defendants]” and which “purported to ‘confirm’ . . . that Nelson’s investment was worth
$651,000.” (See id. ¶ 82.) Thereafter, in March and August 2015 respectively, “Nelson
commissioned two separate independent appraisals on the artwork acquired from the
[d]efendants” (see id. ¶ 83); one appraiser valued the collection at “$17,000 in toto,” and
the other valued it at “no more than $30,000.00” (see id. ¶ 84). Page 3
Based thereon, plaintiffs assert seven Causes of Action, titled, respectively:
“Conspiracy to violate RICO – § 1962 (c) & (d) (As to All Defendants),” “Fraud:
Intentional Misrepresentation (By Barth as to All Defendants),” “Fraud: Intentional
Misrepresentation (By Nelson as to All Defendants Except Defendant Jacobson),”
“Conspiracy (By Barth as to All Defendants),” “Conspiracy (By Nelson et al. as to All
Defendants Except Jacobson),” “Breach of Contract (By Barth as to all Defendants),” and
“Breach of Contract (As to Nelson to All Defendants Except Jacobson).”
By the instant motion, Jacobson argues she is entitled to dismissal of each of the
four causes of action asserted against her.
LEGAL STANDARD
United States District Court
Northern District of California
Dismissal under Rule 12(b)(6) of the Federal Rules of Civil Procedure “can be
based on the lack of a cognizable legal theory or the absence of sufficient facts alleged
under a cognizable legal theory.” See Balistreri v. Pacifica Police Dep't, 901 F.2d 696,
699 (9th Cir. 1990). Rule 8(a)(2), however, “requires only ‘a short and plain statement of
the claim showing that the pleader is entitled to relief.’” See Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 555 (2007) (quoting Fed. R. Civ. P. 8(a)(2)). Consequently, “a
complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual
allegations.” See id. Nonetheless, “a plaintiff’s obligation to provide the grounds of his
entitlement to relief requires more than labels and conclusions, and a formulaic recitation
of the elements of a cause of action will not do.” See id. (internal quotation, citation, and
alteration omitted).
In analyzing a motion to dismiss, a district court must accept as true all material
allegations in the complaint, and construe them in the light most favorable to the
nonmoving party. See NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). “To
survive a motion to dismiss, a complaint must contain sufficient factual material, accepted
as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (quoting Twombly, 550 U.S. at 570). “Factual allegations must be
enough to raise a right to relief above the speculative level[.]” Twombly, 550 U.S. at 555. Page 4
Courts “are not bound to accept as true a legal conclusion couched as a factual
allegation.” See Iqbal, 556 U.S. at 678 (internal quotation and citation omitted).
United States District Court
Northern District of California
DISCUSSION
A.
First Cause of Action: “Conspiracy to violate RICO – § 1962(c) & (d)
(As to All Defendants)”
In the First Cause of Action, plaintiffs allege defendants violated the Racketeer
Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq., through a
“pattern of racketeering” from 2008 to present. (See AC ¶¶ 21, 98, 102.) In particular,
plaintiffs allege defendants violated section 1962(c) and (d). (See id. ¶ 95.) In support
thereof, plaintiffs allege that defendants structured an enterprise (“the Enterprise”) that
was designed to “fraudulently scheme money out of unsuspecting vulnerable victims”
(see id. ¶36), and that plaintiffs were “induced” by “multiple . . . misrepresentations” to
purchase artwork that “[d]efendants knew was worth no more than ten percent of . . . the
purchase price paid to the [d]efendants” (see id. ¶¶ 117-18).
Section 1962(c) prohibits “any person employed by or associated with any
enterprise” from “conduct[ing] or participat[ing], directly or indirectly, in the conduct of
such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful
debt.” See 18 U.S.C. § 1962(c). A “pattern of racketeering activity” “requires at least two
acts of racketeering activity.” See id. § 1961(5). Here, plaintiffs allege defendants have
committed “mail and wire fraud” (see AC ¶ 102), both of which are listed among the acts
that meet the definition of racketeering activity, see 18 U.S.C. § 1961(1)(B).
In pleading a civil RICO claim based on allegations of fraud, a plaintiff must
comply with Rule 9(b) of the Federal Rules of Civil Procedure, by stating the “time, place,
and specific content of the false representations as well as the identities of the parties to
the misrepresentation.” See Edwards v. Marin Park, Inc., 356 F.3d 1058, 1065-66 (9th
Cir. 2004) (internal quotation and citation omitted). Further, where “a fraud suit involve[s]
multiple defendants, a plaintiff must, at a minimum, identify the role of each defendant in
the alleged fraudulent scheme.” See Swartz v. KPMG LLP, 476 F.3d 756, 765 (9th Cir. Page 5 United States District Court
Northern District of California
2007) (internal quotation, citation, and alteration omitted).
Jacobson contends the First Cause of Action as asserted against her should be
dismissed for failure to sufficiently plead her role in the alleged fraudulent scheme. As
set forth below, the Court agrees.
First, to the extent said Cause of Action is brought on behalf of Nelson, plaintiffs,
as Jacobson points out, have admitted they have not alleged sufficient facts to assert a
claim. In particular, plaintiffs allege “[t]he fraudulent sale of paintings involving Leslee
Nelson took place in 2014 and the [p]laintiffs have no evidence at this time that suggests
that Jacobson was involved with the Leslee Nelson transactions.” (See Compl. ¶ 41 n.5.)
Moreover, irrespective of the above-referenced concession, the Court notes that, to the
extent the First Cause of Action is brought on behalf of Nelson, all of the acts on which
said claim is based are alleged to have been committed by Levy.
Although plaintiffs oppose the instant motion to the extent the First Cause of
Action is brought on behalf of Barth, arguing they have pleaded sufficient facts to show
Jacobson “played an integral role in the fraudulent scheme” (see Pl.’s Opp. at 5:18), the
Court is not persuaded. Plaintiffs allege Jacobson “was the Chief Creative Officer and
co-founder of Artéquesta” (see AC ¶ 31) and allowed Levy to “use . . . her home to
showcase, promote and conduct sales of the art for Barth and other potential customers
of the Enterprise” (see id. ¶ 61); plaintiffs do not allege, however, that Jacobson was
present at the time any of the conversations or sales on which the claim is based
occurred, nor do they allege any other facts sufficient to support an inference that
Jacobson knew of or otherwise participated in Levy’s allegedly fraudulent conduct.
Plaintiffs’ reliance on their allegation that Jacobson made false statements in a
2011 advertisement for a company called “Musée Snowden,” published in a city guide,
and in a “sales pitch to new customers,” included in a 2012 email to a former Artéquesta
employee (see AC ¶¶ 33-34, Exs. B-C), is unavailing. Plaintiffs fail to identify the
assertedly false statements contained therein, let alone how plaintiffs were harmed
thereby. See Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir. 2001) (holding “[t]o
comply with Rule 9(b), allegations of fraud must be specific enough to give defendants
notice of the particular misconduct which is alleged to constitute the fraud charged”)
(internal quotation and citation omitted). Page 6
Plaintiffs’ conclusory allegation that Jacobson was an “active participant with the
Enterprise” (see AC ¶ 54) and similar conclusory allegations likewise are insufficient to
support their claim as asserted against Jacobson. See Swartz, 476 F.3d at 765 (rejecting
conclusory allegation that defendants “were active participants in the conspiracy”).
Without the requisite supporting facts, plaintiffs’ claim under section 1962(c) fails. See
Swartz, 476 F.3d at 765 (requiring plaintiff to “identify the role of each defendant in the
alleged fraudulent scheme”); see also Twombly, 550 U.S. at 555 (holding “[f]actual
allegations must be enough to raise a right to relief above the speculative level”).
United States District Court
Northern District of California
As noted, plaintiffs also allege defendants violated section 1962(d). (See AC
¶¶ 124-25.) Section 1962(d) prohibits any person from “conspir[ing] to violate any of the
provisions of subsection (a), (b), or (c) of [section 1962].” See 18 U.S.C. § 1962(d).
Here, plaintiffs base their claim under section 1962(d) on an alleged violation of section
1962(c). (See AC ¶ 125.) To be held liable under section 1962(d), “[a] defendant must
. . . have been aware of the essential nature and scope of the enterprise and intended to
participate in it.” See Howard v. America Online Inc., 208 F.3d 741, 751 (9th Cir. 2000)
(internal quotation and citation omitted). Here, as set forth above, plaintiffs have failed to
adequately plead any facts to support Jacobson’s participation in the alleged enterprise,
including whether she was aware of said enterprise or intended to participate therein.
Accordingly, to the extent the First Cause of Action is asserted against Jacobson,
it will be dismissed and plaintiffs will be afforded leave to amend. See Balistrieri,
F.2d at 701 (holding leave to amend “should be granted if it appears at all possible that
the plaintiff can correct the defect”) (internal quotation and citation omitted).
B.
Second Cause of Action: “Fraud: Intentional Misrepresentation (By
Barth as to All Defendants)”
In the Second Cause of Action, plaintiffs allege, on behalf of Barth, a state law
Similarly, to the extent plaintiffs argue they have sufficiently pleaded facts to
support alter ego as a theory of liability, the Court disagrees. Page 7
claim of intentional misrepresentation. The Second Cause of Action arises from the
same set of facts as the RICO claim, namely that Barth “lost more than $400,000,” which
she “only invested . . . because she reasonably relied on the [d]efendants material and
numerous false misrepresentations.” (See AC ¶ 140.)
subject to dismissal because it has not been pleaded with sufficient particularity. In
response, plaintiffs contend they have “established” that defendants “conspired together
to commit . . . fraudulent acts” and consequently are “each jointly and severable liable for
the damages that resulted from the conspiracy.” (See Pl.’s Opp. at 11:11-14.) Again, the
United States District Court
Northern District of California
Jacobson argues the Second Cause of Action, as alleged against her, likewise is
Court is not persuaded.
Under California law, a plaintiff may not allege conspiracy as a cause of action, but
may rely upon it as “a legal doctrine that imposes liability on persons who, although not
actually committing a tort themselves, share with the immediate tortfeasors a common
plan or design in its perpetration.” Applied Equip. Corp. v. Litton Saudi Arabia Ltd., 7 Cal.
4th 503, 510-11 (1994). “A civil conspiracy must be activated by the commission of an
actual tort,” such as “common law fraud.” See AREI II Cases, 216 Cal. App. 4th 1004,
1021 (2013) (internal quotation and citation omitted). “Mere association,” however, “does
not make a conspiracy”; rather, “[t]here must be evidence of some participation or interest
in the commission of the offense.” See Kidron v. Movie Acquisition Corp., 40 Cal. App.
4th 1571, 1582 (1995) (internal quotation and citation omitted).
For the reasons set forth above with respect to the First Cause of Action, plaintiffs
have not alleged sufficient facts to support a reasonable inference that Jacobson
conspired with Levy to defraud Barth.
Accordingly, the Second Cause of Action, as alleged against Jacobson, will be
dismissed with leave to amend. See Balistrieri, 901 F.2d at 701.
Fourth Cause of Action: “Conspiracy (By Barth as to All Defendants)”
C.
In the Fourth Cause of Action, plaintiffs allege, on behalf of Barth, that defendants
“conspire[d] to conduct and participate in [a] RICO enterprise” (see AC ¶ 161 (emphasis Page 8
omitted)) and “conspire[d] and collude[d] to deceive and defraud [p]laintiff Barth” (see id.
¶ 163). As Jacobson points out, however, there is no cause of action for civil conspiracy
under California law. See Applied Equipment Corp., 7 Cal. 4th at 510 (holding
“[c]onspiracy is not a cause of action”).
United States District Court
Northern District of California
Accordingly, the Fourth Cause of Action, as alleged against Jacobson, will be
dismissed without leave to amend.
D.
Sixth Cause of Action: “Breach of Contract (By Barth as to All
Defendants)”
In the Sixth Cause of Action, plaintiffs allege that “[d]efendants entered into a
contract in fact with [p]laintiff Nancy Barth,” whereby defendants “agreed, among other
promises, to provide . . . Barth, for money, with authentic artwork investments worth at
least the value of plaintiffs’ purchase price” (see AC ¶ 177), and further agreed, “whether
explicitly or impliedly, not to make false representations about either the authenticity of
the artwork or the value of the artwork” (see id. ¶ 182). Plaintiffs allege “[t]he Enterprise
materially breached their contracts with Nancy Barth by . . . selling inauthentic artwork
. . . , making false representations . . . , and selling artwork to Barth that was worth but a
mere fraction of the value of plaintiffs’ purchase price.” (See id. ¶ 183.)
Jacobson argues the Sixth Cause of Action is subject to dismissal as alleged
against her because “California law provides that the terms of any contract must be
recited verbatim or attached to the [c]omplaint,” which plaintiffs have not done. (See Mot.
at 16:10-11). The cases on which Jacobson relies, however, concern contracts in writing.
See, e.g., Otworth v. Southern Pac. Transp. Co., 166 Cal. App. 3d 452, 459 (1985) (“If
the action is based on an alleged breach of a written contract, the terms must be set out
verbatim in the body of the complaint or a copy of the written instrument must be
attached and incorporated by reference.”). Here, the subject contract is alleged to be “a
contract in fact.” (See AC ¶ 177.)
Nevertheless, the claim, as presently pleaded against Jacobson, fails. First,
plaintiffs have not made clear whether, by alleging a “contract in fact,” they intend to Page 9 United States District Court
Northern District of California
allege an oral contract or an implied contract. Under California law, a contract is “either
express or implied.” See Cal. Civ. Code § 1619. The terms of an express contract “are
stated in words,” see id. § 1620, whereas the terms of an implied contract “are
manifested by conduct,” see id. § 1621. If plaintiffs seek to plead an oral contract, they
must allege “such verbal agreement by setting forth the substance of its relative terms.”
See Gautier v. Gen. Tel. Co., 234 Cal. App. 2d 302, 305 (1965). Alternatively, if plaintiffs
seek to plead an implied contract, they must allege sufficient facts, such as a “course of
conduct,” from which “the promise is implied.” See Cal. Emergency Physicians Med.
Grp. v. PacifiCare of Cal., 111 Cal. App. 4th 1127, 1134 (2003). Here, irrespective of
whether plaintiffs’ allegations suffice to set forth the substance of an oral contract,
plaintiffs, as Jacobson points out, have failed to allege any facts to support their
conclusory allegation that Jacobson was a party to any such oral agreement, nor have
plaintiffs alleged any conduct on the part of Jacobson that would show she made an
implied promise to Barth.
Accordingly, the Sixth Cause of Action, as alleged against Jacobson, will be
dismissed with leave to amend. See Balistrieri, 901 F.2d at 701.
CONCLUSION
For the reasons stated above, Jacobson’s motion to dismiss is hereby GRANTED
as follows:
1.
To the extent Jacobson’s motion seeks dismissal of the Fourth Cause of
Action as alleged against Jacobson, said cause of action is DISMISSED without leave to
amend.
2.
To the extent Jacobson’s motion seeks dismissal of the First, Second, and
Sixth Causes of Action as alleged against Jacobson, said causes of action are
DISMISSED with leave to amend. Should plaintiffs wish to file an amended complaint for
Although such argument was raised by Jacobson for the first time in her reply, it
is based upon the same arguments made in her motion and addressed by plaintiffs in
response thereto. Page 10
purposes of curing the deficiencies identified herein, plaintiffs shall file, no later than
December 9, 2016, a Second Amended Complaint. Plaintiffs may not, however, add any
new causes of action or add any new defendant without first obtaining leave of court.
See Fed. R. Civ. P. 15(a)(2). If plaintiffs do not file a Second Amended Complaint within
the time provided, the instant action will proceed on the claims in the FAC against Levy
and Levy International.
3.
In light of the above, the Case Management Conference is continued from
December 9, 2016, to February 17, 2017.
IT IS SO ORDERED.
United States District Court
Northern District of California
Dated: November 23, MAXINE M. CHESNEY
United States District Judge
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Case 3:16-cv-03797-MMC Document 55 Filed 11/23/16 Page 1 of 10
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IN THE UNITED STATES DISTRICT COURT
5
FOR THE NORTHERN DISTRICT OF CALIFORNIA
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LESLEE A. NELSON, et al.,
Plaintiffs,
8
RAYAH LEVY, et al.,
Defendants.
11
United States District Court
Northern District of California
ORDER GRANTING DEFENDANT
JESSICA JACOBSON'S MOTION TO
DISMISS; AFFORDING PLAINTIFFS
LEAVE TO AMEND; CONTINUING
CASE MANAGEMENT CONFERENCE
v.
9
10
Case No. 16-cv-03797-MMC
12
13
Before the Court is defendant Jessica Jacobson’s (“Jacobson”) motion, filed
14
September 15, 2016, to dismiss plaintiffs’ amended complaint (“AC”) pursuant to Rule
15
12(b)(6) of the Federal Rules of Civil Procedure.1 Plaintiffs Leslee A. Nelson, individually
16
and in her capacity as trustee and trustor of the Leslee A. Nelson Revocable Trust
17
(“Nelson”), and Nancy Barth (“Barth”) have filed opposition, to which Jacobson has
18
replied. Having read and considered the papers filed in support of and in opposition to
19
the motion, the Court rules as follows.2
BACKGROUND3
20
21
Defendants Levy and Jacobson “co-founded ArtéQuesta in 2008 with a [stated]
22
mission to help people make wise decisions for investing in art.” (See AC ¶ 1.) Levy
23
served as the “Chief Executive Officer” (see id. ¶¶ 10, 12) and Jacobson served as the
24
1
25
26
On September 30, 2016, defendants Rayah Levy (“Levy”), and Rayah Rachel
Levy International Inc., dba Artéquesta and Agents of Humanity in the Fine Arts, (“Levy
International”) each filed an answer to plaintiffs’ amended complaint.
2
By order filed October 13, 2016, the Court took the motion under submission.
3
The following factual allegations are taken from the complaint.
27
28
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Case 3:16-cv-03797-MMC Document 55 Filed 11/23/16 Page 2 of 10
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United States District Court
Northern District of California
2
“Chief Creative Officer . . . until at least the end of 2013” (see id. ¶ 13).
Plaintiff Barth met Levy in 2013. (See id. ¶ 55.) In August 2013, Levy “contacted
3
Barth multiple times, through e-mail and telephone, during which she urged Barth to
4
invest with the [d]efendants in art.” (See id. ¶ 57.) Later that same month, Levy “met
5
with Barth in . . . Jacobson’s personal residence . . . , at which time . . . Barth viewed and
6
purchased all of the art on display in the premises” (see id. ¶ 60) and, pursuant to Levy’s
7
instructions, wired $370,000 to a specified Wells Fargo bank account (see id. ¶ 62). On
8
August 27, 2013, Levy sent Barth “bogus ‘Certificates of Fine Art Evaluation’ – created by
9
[defendants] – that her investment . . . had tripled in value and was now, just one day
10
later, worth $1,114,000 at ‘current market value.’” (See id. ¶ 72.) “In the Fall of 2013,
11
after [defendants] made additional solicitations for Barth to make further investments,”
12
Barth met with Levy “at Levy’s personal residence . . . , at which time Barth purchased
13
two additional art works . . . for a total of $50,000.” (See id. ¶ 74). Barth “wired this
14
money to the previously specified Wells Fargo Account” (see id. ¶ 131), bringing her total
15
payment to $420,000 in exchange for art which “[d]efendants knew [was] worth no more
16
than 10 percent of Barth’s purchase price” (see id. ¶ 118).
17
Plaintiff Nelson “first met Levy in September 2014” (see id. ¶ 50) and, “over the
18
course of many months, via e-mail and the telephone,” Levy had “numerous
19
conversations with Nelson” encouraging her to invest in art “through [defendants]” (see
20
id. ¶ 67). On November 20, 2014, Nelson, pursuant to Levy’s instructions, wired
21
$300,000 “from the Leslee A. Nelson Revocable Trust” to a specified Wells Fargo bank
22
account. (See id. ¶ 78). On November 30, 2014, the “[d]efendants (except Jacobson)
23
presented Nelson with bogus ‘Certificates of Fine Art Evaluation, which were created by
24
[defendants]” and which “purported to ‘confirm’ . . . that Nelson’s investment was worth
25
$651,000.” (See id. ¶ 82.) Thereafter, in March and August 2015 respectively, “Nelson
26
commissioned two separate independent appraisals on the artwork acquired from the
27
[d]efendants” (see id. ¶ 83); one appraiser valued the collection at “$17,000 in toto,” and
28
the other valued it at “no more than $30,000.00” (see id. ¶ 84).
2
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Case 3:16-cv-03797-MMC Document 55 Filed 11/23/16 Page 3 of 10
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Based thereon, plaintiffs assert seven Causes of Action, titled, respectively:
2
“Conspiracy to violate RICO – § 1962 (c) & (d) (As to All Defendants),” “Fraud:
3
Intentional Misrepresentation (By Barth as to All Defendants),” “Fraud: Intentional
4
Misrepresentation (By Nelson as to All Defendants Except Defendant Jacobson),”
5
“Conspiracy (By Barth as to All Defendants),” “Conspiracy (By Nelson et al. as to All
6
Defendants Except Jacobson),” “Breach of Contract (By Barth as to all Defendants),” and
7
“Breach of Contract (As to Nelson to All Defendants Except Jacobson).”
8
9
By the instant motion, Jacobson argues she is entitled to dismissal of each of the
four causes of action asserted against her.
LEGAL STANDARD
10
United States District Court
Northern District of California
11
Dismissal under Rule 12(b)(6) of the Federal Rules of Civil Procedure “can be
12
based on the lack of a cognizable legal theory or the absence of sufficient facts alleged
13
under a cognizable legal theory.” See Balistreri v. Pacifica Police Dep't, 901 F.2d 696,
14
699 (9th Cir. 1990). Rule 8(a)(2), however, “requires only ‘a short and plain statement of
15
the claim showing that the pleader is entitled to relief.’” See Bell Atlantic Corp. v.
16
Twombly, 550 U.S. 544, 555 (2007) (quoting Fed. R. Civ. P. 8(a)(2)). Consequently, “a
17
complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual
18
allegations.” See id. Nonetheless, “a plaintiff’s obligation to provide the grounds of his
19
entitlement to relief requires more than labels and conclusions, and a formulaic recitation
20
of the elements of a cause of action will not do.” See id. (internal quotation, citation, and
21
alteration omitted).
22
In analyzing a motion to dismiss, a district court must accept as true all material
23
allegations in the complaint, and construe them in the light most favorable to the
24
nonmoving party. See NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). “To
25
survive a motion to dismiss, a complaint must contain sufficient factual material, accepted
26
as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S.
27
662, 678 (2009) (quoting Twombly, 550 U.S. at 570). “Factual allegations must be
28
enough to raise a right to relief above the speculative level[.]” Twombly, 550 U.S. at 555.
3
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Case 3:16-cv-03797-MMC Document 55 Filed 11/23/16 Page 4 of 10
1
Courts “are not bound to accept as true a legal conclusion couched as a factual
2
allegation.” See Iqbal, 556 U.S. at 678 (internal quotation and citation omitted).
3
4
5
United States District Court
Northern District of California
6
DISCUSSION
A.
First Cause of Action: “Conspiracy to violate RICO – § 1962(c) & (d)
(As to All Defendants)”
In the First Cause of Action, plaintiffs allege defendants violated the Racketeer
7
Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq., through a
8
“pattern of racketeering” from 2008 to present. (See AC ¶¶ 21, 98, 102.) In particular,
9
plaintiffs allege defendants violated section 1962(c) and (d). (See id. ¶ 95.) In support
10
thereof, plaintiffs allege that defendants structured an enterprise (“the Enterprise”) that
11
was designed to “fraudulently scheme money out of unsuspecting vulnerable victims”
12
(see id. ¶36), and that plaintiffs were “induced” by “multiple . . . misrepresentations” to
13
purchase artwork that “[d]efendants knew was worth no more than ten percent of . . . the
14
purchase price paid to the [d]efendants” (see id. ¶¶ 117-18).
15
Section 1962(c) prohibits “any person employed by or associated with any
16
enterprise” from “conduct[ing] or participat[ing], directly or indirectly, in the conduct of
17
such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful
18
debt.” See 18 U.S.C. § 1962(c). A “pattern of racketeering activity” “requires at least two
19
acts of racketeering activity.” See id. § 1961(5). Here, plaintiffs allege defendants have
20
committed “mail and wire fraud” (see AC ¶ 102), both of which are listed among the acts
21
that meet the definition of racketeering activity, see 18 U.S.C. § 1961(1)(B).
22
In pleading a civil RICO claim based on allegations of fraud, a plaintiff must
23
comply with Rule 9(b) of the Federal Rules of Civil Procedure, by stating the “time, place,
24
and specific content of the false representations as well as the identities of the parties to
25
the misrepresentation.” See Edwards v. Marin Park, Inc., 356 F.3d 1058, 1065-66 (9th
26
Cir. 2004) (internal quotation and citation omitted). Further, where “a fraud suit involve[s]
27
multiple defendants, a plaintiff must, at a minimum, identify the role of each defendant in
28
the alleged fraudulent scheme.” See Swartz v. KPMG LLP, 476 F.3d 756, 765 (9th Cir.
4
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2007) (internal quotation, citation, and alteration omitted).
2
Jacobson contends the First Cause of Action as asserted against her should be
3
dismissed for failure to sufficiently plead her role in the alleged fraudulent scheme. As
4
set forth below, the Court agrees.
5
First, to the extent said Cause of Action is brought on behalf of Nelson, plaintiffs,
6
as Jacobson points out, have admitted they have not alleged sufficient facts to assert a
7
claim. In particular, plaintiffs allege “[t]he fraudulent sale of paintings involving Leslee
8
Nelson took place in 2014 and the [p]laintiffs have no evidence at this time that suggests
9
that Jacobson was involved with the Leslee Nelson transactions.” (See Compl. ¶ 41 n.5.)
10
Moreover, irrespective of the above-referenced concession, the Court notes that, to the
11
extent the First Cause of Action is brought on behalf of Nelson, all of the acts on which
12
said claim is based are alleged to have been committed by Levy.
13
Although plaintiffs oppose the instant motion to the extent the First Cause of
14
Action is brought on behalf of Barth, arguing they have pleaded sufficient facts to show
15
Jacobson “played an integral role in the fraudulent scheme” (see Pl.’s Opp. at 5:18), the
16
Court is not persuaded. Plaintiffs allege Jacobson “was the Chief Creative Officer and
17
co-founder of Artéquesta” (see AC ¶ 31) and allowed Levy to “use . . . her home to
18
showcase, promote and conduct sales of the art for Barth and other potential customers
19
of the Enterprise” (see id. ¶ 61); plaintiffs do not allege, however, that Jacobson was
20
present at the time any of the conversations or sales on which the claim is based
21
occurred, nor do they allege any other facts sufficient to support an inference that
22
Jacobson knew of or otherwise participated in Levy’s allegedly fraudulent conduct.4
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25
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Plaintiffs’ reliance on their allegation that Jacobson made false statements in a
2011 advertisement for a company called “Musée Snowden,” published in a city guide,
and in a “sales pitch to new customers,” included in a 2012 email to a former Artéquesta
employee (see AC ¶¶ 33-34, Exs. B-C), is unavailing. Plaintiffs fail to identify the
assertedly false statements contained therein, let alone how plaintiffs were harmed
thereby. See Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir. 2001) (holding “[t]o
comply with Rule 9(b), allegations of fraud must be specific enough to give defendants
notice of the particular misconduct which is alleged to constitute the fraud charged”)
(internal quotation and citation omitted).
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1
Plaintiffs’ conclusory allegation that Jacobson was an “active participant with the
2
Enterprise” (see AC ¶ 54) and similar conclusory allegations likewise are insufficient to
3
support their claim as asserted against Jacobson. See Swartz, 476 F.3d at 765 (rejecting
4
conclusory allegation that defendants “were active participants in the conspiracy”).
5
Without the requisite supporting facts, plaintiffs’ claim under section 1962(c) fails. See
6
Swartz, 476 F.3d at 765 (requiring plaintiff to “identify the role of each defendant in the
7
alleged fraudulent scheme”); see also Twombly, 550 U.S. at 555 (holding “[f]actual
8
allegations must be enough to raise a right to relief above the speculative level”). 5
United States District Court
Northern District of California
9
As noted, plaintiffs also allege defendants violated section 1962(d). (See AC
10
¶¶ 124-25.) Section 1962(d) prohibits any person from “conspir[ing] to violate any of the
11
provisions of subsection (a), (b), or (c) of [section 1962].” See 18 U.S.C. § 1962(d).
12
Here, plaintiffs base their claim under section 1962(d) on an alleged violation of section
13
1962(c). (See AC ¶ 125.) To be held liable under section 1962(d), “[a] defendant must
14
. . . have been aware of the essential nature and scope of the enterprise and intended to
15
participate in it.” See Howard v. America Online Inc., 208 F.3d 741, 751 (9th Cir. 2000)
16
(internal quotation and citation omitted). Here, as set forth above, plaintiffs have failed to
17
adequately plead any facts to support Jacobson’s participation in the alleged enterprise,
18
including whether she was aware of said enterprise or intended to participate therein.
19
Accordingly, to the extent the First Cause of Action is asserted against Jacobson,
20
it will be dismissed and plaintiffs will be afforded leave to amend. See Balistrieri, 901
21
F.2d at 701 (holding leave to amend “should be granted if it appears at all possible that
22
the plaintiff can correct the defect”) (internal quotation and citation omitted).
23
24
25
B.
Second Cause of Action: “Fraud: Intentional Misrepresentation (By
Barth as to All Defendants)”
In the Second Cause of Action, plaintiffs allege, on behalf of Barth, a state law
26
27
28
5
Similarly, to the extent plaintiffs argue they have sufficiently pleaded facts to
support alter ego as a theory of liability, the Court disagrees.
6
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claim of intentional misrepresentation. The Second Cause of Action arises from the
2
same set of facts as the RICO claim, namely that Barth “lost more than $400,000,” which
3
she “only invested . . . because she reasonably relied on the [d]efendants material and
4
numerous false misrepresentations.” (See AC ¶ 140.)
5
6
subject to dismissal because it has not been pleaded with sufficient particularity. In
7
response, plaintiffs contend they have “established” that defendants “conspired together
8
to commit . . . fraudulent acts” and consequently are “each jointly and severable liable for
9
the damages that resulted from the conspiracy.” (See Pl.’s Opp. at 11:11-14.) Again, the
10
11
United States District Court
Northern District of California
Jacobson argues the Second Cause of Action, as alleged against her, likewise is
Court is not persuaded.
Under California law, a plaintiff may not allege conspiracy as a cause of action, but
12
may rely upon it as “a legal doctrine that imposes liability on persons who, although not
13
actually committing a tort themselves, share with the immediate tortfeasors a common
14
plan or design in its perpetration.” Applied Equip. Corp. v. Litton Saudi Arabia Ltd., 7 Cal.
15
4th 503, 510-11 (1994). “A civil conspiracy must be activated by the commission of an
16
actual tort,” such as “common law fraud.” See AREI II Cases, 216 Cal. App. 4th 1004,
17
1021 (2013) (internal quotation and citation omitted). “Mere association,” however, “does
18
not make a conspiracy”; rather, “[t]here must be evidence of some participation or interest
19
in the commission of the offense.” See Kidron v. Movie Acquisition Corp., 40 Cal. App.
20
4th 1571, 1582 (1995) (internal quotation and citation omitted).
21
For the reasons set forth above with respect to the First Cause of Action, plaintiffs
22
have not alleged sufficient facts to support a reasonable inference that Jacobson
23
conspired with Levy to defraud Barth.
24
25
Accordingly, the Second Cause of Action, as alleged against Jacobson, will be
dismissed with leave to amend. See Balistrieri, 901 F.2d at 701.
Fourth Cause of Action: “Conspiracy (By Barth as to All Defendants)”
26
C.
27
In the Fourth Cause of Action, plaintiffs allege, on behalf of Barth, that defendants
28
“conspire[d] to conduct and participate in [a] RICO enterprise” (see AC ¶ 161 (emphasis
7
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omitted)) and “conspire[d] and collude[d] to deceive and defraud [p]laintiff Barth” (see id.
2
¶ 163). As Jacobson points out, however, there is no cause of action for civil conspiracy
3
under California law. See Applied Equipment Corp., 7 Cal. 4th at 510 (holding
4
“[c]onspiracy is not a cause of action”).
5
6
7
8
United States District Court
Northern District of California
9
Accordingly, the Fourth Cause of Action, as alleged against Jacobson, will be
dismissed without leave to amend.
D.
Sixth Cause of Action: “Breach of Contract (By Barth as to All
Defendants)”
In the Sixth Cause of Action, plaintiffs allege that “[d]efendants entered into a
10
contract in fact with [p]laintiff Nancy Barth,” whereby defendants “agreed, among other
11
promises, to provide . . . Barth, for money, with authentic artwork investments worth at
12
least the value of plaintiffs’ purchase price” (see AC ¶ 177), and further agreed, “whether
13
explicitly or impliedly, not to make false representations about either the authenticity of
14
the artwork or the value of the artwork” (see id. ¶ 182). Plaintiffs allege “[t]he Enterprise
15
materially breached their contracts with Nancy Barth by . . . selling inauthentic artwork
16
. . . , making false representations . . . , and selling artwork to Barth that was worth but a
17
mere fraction of the value of plaintiffs’ purchase price.” (See id. ¶ 183.)
18
Jacobson argues the Sixth Cause of Action is subject to dismissal as alleged
19
against her because “California law provides that the terms of any contract must be
20
recited verbatim or attached to the [c]omplaint,” which plaintiffs have not done. (See Mot.
21
at 16:10-11). The cases on which Jacobson relies, however, concern contracts in writing.
22
See, e.g., Otworth v. Southern Pac. Transp. Co., 166 Cal. App. 3d 452, 459 (1985) (“If
23
the action is based on an alleged breach of a written contract, the terms must be set out
24
verbatim in the body of the complaint or a copy of the written instrument must be
25
attached and incorporated by reference.”). Here, the subject contract is alleged to be “a
26
contract in fact.” (See AC ¶ 177.)
27
28
Nevertheless, the claim, as presently pleaded against Jacobson, fails. First,
plaintiffs have not made clear whether, by alleging a “contract in fact,” they intend to
8
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allege an oral contract or an implied contract. Under California law, a contract is “either
2
express or implied.” See Cal. Civ. Code § 1619. The terms of an express contract “are
3
stated in words,” see id. § 1620, whereas the terms of an implied contract “are
4
manifested by conduct,” see id. § 1621. If plaintiffs seek to plead an oral contract, they
5
must allege “such verbal agreement by setting forth the substance of its relative terms.”
6
See Gautier v. Gen. Tel. Co., 234 Cal. App. 2d 302, 305 (1965). Alternatively, if plaintiffs
7
seek to plead an implied contract, they must allege sufficient facts, such as a “course of
8
conduct,” from which “the promise is implied.” See Cal. Emergency Physicians Med.
9
Grp. v. PacifiCare of Cal., 111 Cal. App. 4th 1127, 1134 (2003). Here, irrespective of
10
whether plaintiffs’ allegations suffice to set forth the substance of an oral contract,
11
plaintiffs, as Jacobson points out, have failed to allege any facts to support their
12
conclusory allegation that Jacobson was a party to any such oral agreement, nor have
13
plaintiffs alleged any conduct on the part of Jacobson that would show she made an
14
implied promise to Barth.6
15
16
Accordingly, the Sixth Cause of Action, as alleged against Jacobson, will be
dismissed with leave to amend. See Balistrieri, 901 F.2d at 701.
CONCLUSION
17
18
19
20
For the reasons stated above, Jacobson’s motion to dismiss is hereby GRANTED
as follows:
1.
To the extent Jacobson’s motion seeks dismissal of the Fourth Cause of
21
Action as alleged against Jacobson, said cause of action is DISMISSED without leave to
22
amend.
23
2.
To the extent Jacobson’s motion seeks dismissal of the First, Second, and
24
Sixth Causes of Action as alleged against Jacobson, said causes of action are
25
DISMISSED with leave to amend. Should plaintiffs wish to file an amended complaint for
26
6
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28
Although such argument was raised by Jacobson for the first time in her reply, it
is based upon the same arguments made in her motion and addressed by plaintiffs in
response thereto.
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purposes of curing the deficiencies identified herein, plaintiffs shall file, no later than
2
December 9, 2016, a Second Amended Complaint. Plaintiffs may not, however, add any
3
new causes of action or add any new defendant without first obtaining leave of court.
4
See Fed. R. Civ. P. 15(a)(2). If plaintiffs do not file a Second Amended Complaint within
5
the time provided, the instant action will proceed on the claims in the FAC against Levy
6
and Levy International.
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3.
In light of the above, the Case Management Conference is continued from
December 9, 2016, to February 17, 2017.
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IT IS SO ORDERED.
United States District Court
Northern District of California
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Dated: November 23, 2016
MAXINE M. CHESNEY
United States District Judge
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