Thomas Land & Development, LLC v. Vratsinas Construction Company

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 THOMAS LAND & DEVELOPMENT, Case No.: 18-CV-1896-AJB-NLS LLC, 12 Plaintiff, ORDER GRANTING IN PART AND 13 v. DENYING IN PART DEFENDANTS’ VRATSINAS CONSTRUCTION MOTIONS TO DIMISS 14 COMPANY, an Arkansas corporation; et (Docs. No. 4, 25). 15 al., 16 Defendants. 17 18 Defendant Vratsinas Construction Company moves to dismiss Plaintiff Thomas 19 Land & Development’s complaint, asserting (1) Plaintiff fails to adequately allege standing 20 under Rule 12(b)(1); (2) Plaintiff fails to establish personal jurisdiction over Vratsinas 21 under Rule 12(b)(2); (3) Plaintiff fails to establish proper venue under Rule 12(b)(3); and 22 (4) that Plaintiff has not alleged any facts establishing a plausible claim for relief under its 23 RICO, Sherman Act, and negligence causes of action under Rule 12(b)(6). (Doc. No. 4-1.) 24 A second motion to dismiss made by other VCC entities and the individually named 25 defendants raises nearly identical arguments. (Doc. No. 25.) The Court discusses the 26 arguments raised in the first-filed motion unless otherwise noted. 27 The crucial missing piece in Plaintiff’s complaint is the failure to establish injury in 28 fact by elaborating on Plaintiff’s specific role in the projects where alleged fraud was 1 committed by Vratsinas or providing sufficient detail on how Plaintiff has acquired rights 2 to represent other entities or individuals that may have a claim against defendants in 3 relation to these facts. (Doc. No. 1 at 2 n.1.) Plaintiff does adequately allege Sherman 4 Antitrust Violations and personal jurisdiction against Vratsinas. 5 However, based on the insufficiencies noted herein, the Court GRANTS IN PART 6 AND DENIES IN PART Defendants’ motions to dismiss. (Docs. No. 4, 25.) However, 7 the Court also GRANTS Plaintiff leave to amend. 8 I. BACKGROUND 9 Plaintiff’s claims are all based on the assertion that Vratsinas, in collaboration with 10 other named defendants, committed wrongful and collusive business practices which 11 prevented Plaintiff from lawfully obtaining work and directly contributed to Plaintiff’s 12 damages. (Doc. No. 1 ¶¶ 1, 3.) These practices were conducted through the establishment 13 of various “schemes” including: a “sham subcontractor scheme”, (id. ¶ 18); a “pocket 14 subcontractor kickback scheme”, (id. ¶ 23); an “additional costs manipulation scheme”, 15 (id. ¶ 30); a “fraudulent insurance scheme”, (id. ¶ 35); a “fraudulent change order scheme”, 16 (id. ¶ 41); and a “costs plus to lump sum conversion ‘rebate’ scheme”. (id. ¶ 45 17 (capitalization removed in all).) 18 The schemes consisted of Vratsinas engaging in bid-rigging when selecting 19 subcontractor bids by concealing the lowest bid from the project owner and replacing it 20 with a “sham subcontractor” bid, which was the lowest bid at an inflated price. (Id. ¶¶ 18– 21 22.) Vratsinas would then hire the legitimately lowest bidding subcontractor and retain the 22 difference between their bid and the inflated bid presented to the project owner. Vratsinas 23 would also preselect certain “pocket subcontractors” to assist in this activity by awarding 24 them “kickbacks” for their willingness to misrepresent the actual costs of their labors. 25 (Id. ¶¶ 23–29.) 26 On various projects where Vratsinas and Plaintiff agreed to certain cost allowances 27 for a specific subcontractor’s or trade’s scope of work (where the expenses were not to 28 exceed the allowance, and any remaining balance would be returned to Plaintiff), Vratsinas 1 through various methods would fabricate the amount spent within the allowances and retain 2 the difference between the actual amount spent and the inflated amount presented to 3 Plaintiff. (Id. ¶¶ 31–34.) Vratsinas would also offer to retain insurance on behalf of the 4 project owner, which the project owner would then pay for on the final accounting of the 5 project. However, Vratsinas would misrepresent the actual cost of the insurance premiums 6 to project owners and retain the difference. (Id. ¶¶ 35–40.) 7 Vratsinas instructed “pocket subcontractors” to submit material charges to “cost 8 plus” projects where material costs were being paid directly by the project owner (in 9 comparison to projects where a “lump sum” was paid upfront), even though those materials 10 were not being used for the project whose owner was paying directly for the materials. 11 Instead, the materials were used on “lump sum” projects, and subsequently added to the 12 “lump sum” project owner’s bill as well as to deduct from the allowance provided for their 13 project. This allowed Vratsinas to maximize profits for each individual job. (Id. ¶¶ 41–44.) 14 Vratsinas would also suggest that project owners switch from an audited cost plus payment 15 structure to an unaudited lump sum payment structure to make it more difficult for project 16 owners to detect wrongdoing. (Id. ¶ 45.) 17 Plaintiff represents that Vratsinas implemented these schemes into projects, 18 including but not limited to: The Rim Shopping Center in San Antonio, Texas; the Forum 19 on Peachtree Parkway in Peachtree Corners, Georgia; The Forum Carlsbad in Carlsbad, 20 California; and Westside Centre in Huntsville, Alabama. (Id. ¶ 2.) 21 Plaintiff filed his complaint on August 13, 2018. (Id at 1.) Plaintiff alleges causes of 22 action against Vratsinas for violations of: (1) Racketeer Influenced and Corrupt 23 Organizations Act; Count I – Violation of 18 U.S.C. section 1962(c); (2) Racketeer and 24 Corrupt Organizations Act; Count II – Violation of 18 U.S.C. section 1962(d); (3) Sherman 25 Antitrust Act; Violation of 15 U.S.C. section 1; (4) Professional Negligence; and 26 (5) Negligence. (Id.) 27 Plaintiff purports to bring this action on behalf of themselves and for all other 28 similarly situated entities who submitted bids as subcontractors, materialmen or vendors 1 on private projects that were developed, constructed, managed or otherwise controlled by 2 Vratsinas. (Id. ¶ 2.) Plaintiff also purports to be the duly authorized Assignee of any and 3 all existing and potential claims, demands, causes of action, lawsuits, rights of action, 4 expenses, legal fees, and/or damages, of any kind or classification, whether in law, equity 5 or otherwise, alleged against the defendants and arising out of any of the projects in which 6 Vratsinas was involved. (Id. at n.1.) 7 In the prayer for relief, Plaintiff requests for an award of compensatory, treble, and 8 punitive damages, as well as prejudgment and post-judgment interest, in an amount to be 9 determined at trial; for an award of the costs, expenses, and attorney’s fees incurred in 10 prosecuting this action; and for any other such relief the Court deems proper. (Id. at 41.) 11 II. LEGAL STANDARDS 12 A. Lack of Article III Standing Pursuant to 12(b)(1) 13 Under Federal Rule of Civil Procedure Rule 12(b)(1), a defendant may seek to 14 dismiss a complaint for lack of jurisdiction over the subject matter. The federal court is one 15 of limited jurisdiction. See Gould v. Mutual Life Ins. Co. v. New York, 790 F.2d 769, 774 16 (9th Cir. 1986). As such, it cannot reach the merits of any dispute until it confirms its own 17 subject matter jurisdiction. See Steel Co. v. Citizens for a Better Environ., 523 U.S. 83, 95 18 (1998). When considering a Rule 12(b)(1) motion to dismiss, the district court is free to 19 hear evidence regarding jurisdiction and to rule on that issue prior to trial, resolving factual 20 disputes where necessary. See Augustine v. United States, 704 F.2d 1074, 1077 (9th Cir. 21 1983). In such circumstances, “[n]o presumptive truthfulness attaches to plaintiff’s 22 allegations, and the existence of disputed facts will not preclude the trial court from 23 evaluating for itself the merits of jurisdictional claims.” Id. (quoting Thornhill Publishing 24 Co. v. General Telephone & Electronic Corp., 594 F.2d 730, 733 (9th Cir. 1979)). Plaintiff, 25 as the party seeking to invoke jurisdiction, has the burden of establishing that jurisdiction 26 exists. See Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). 27 B. Lack of Personal Jurisdiction Pursuant to 12(b)(2) 28 Federal Rule of Civil Procedure 12(b)(2) provides that a court may dismiss a claim 1 for lack of personal jurisdiction over the person. When a “defendant moves to dismiss a 2 complaint for lack of personal jurisdiction, the plaintiff bears the burden of demonstrating 3 that jurisdiction is appropriate.” Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 4 800 (9th Cir. 2004). When a district court rules on a defendant’s motion to dismiss based 5 on only pleadings, the plaintiff only needs to make a prima facie showing of jurisdictional 6 facts to withstand the motion to dismiss. Data Disc., Inc. v. Sys. Technology Assoc., Inc., 7 557 F.2d 1280, 1285 (9th Cir. 1997); Ballard v. Savage, 65 F.3d 1495, 1498 (9th Cir. 1995). 8 In other words, the plaintiff only needs to demonstrate facts that, if true, would support 9 jurisdiction over the defendant. Ballard, 65 F.3d at 1498. However, the allegations must 10 not be conclusory, but must allege specific acts connecting the defendant with the forum. 11 Greenspun v. Del E. Webb Corp., 634 F.2d 1204, 1208 n.5 (9th Cir. 1980). 12 C. Improper Venue Pursuant to 12(b)(3) 13 Federal Rule of Civil Procedure 12(b)(3) provides that a court may dismiss a claim 14 for improper venue. Once venue is challenged, the burden is on the plaintiff to show that 15 venue is properly laid. Bohara v. Backus Hosp. Medical Benefit Plan, 390 F. Supp. 2d 957, 16 960 (C.D. Cal. 2005); Piedmont Label Co. v. Sun Garden Packing Co., 598 F.2d 491, 496 17 (9th Cir. 1979); King v. Vesco, 342 F. Supp. 120, 125 (N.D. Cal. 1972). Facts supporting 18 venue may be established through evidence outside of the pleadings, such as affidavits or 19 declarations. Argueta v. Banco Mexicano, S.A., 87 F.3d 320, 324 (9th Cir. 1996). 20 D. Insufficient Pleadings Pursuant to 12(b)(6) 21 A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the pleadings 22 and allows a court to dismiss a complaint upon a finding that the plaintiff has failed to state 23 a claim upon which relief may be granted. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 24 2001). The court may dismiss a complaint as a matter of law for: “(1) lack of cognizable 25 legal theory or (2) insufficient facts under a cognizable legal claim.” SmileCare Dental 26 Grp. v. Delta Dental Plan of Cal., 88 F.3d 780, 783 (9th Cir. 1996) (citation omitted). 27 However, a complaint survives a motion to dismiss if it contains “enough facts to state a 28 claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 1 (2007). 2 Notwithstanding this deference, the reviewing court need not accept legal 3 conclusions as true. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). It is also improper for the 4 court to assume “the [plaintiff] can prove [he or she] has not alleged . . . .” Associated Gen. 5 Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983). 6 On the other hand, “[w]hen there are well-pleaded factual allegations, a court should 7 assume their veracity and then determine whether they plausibly give rise to an entitlement 8 to relief.” Iqbal, 556 U.S. at 679. The court only reviews the contents of the complaint, 9 accepting all factual allegations as true, and drawing all reasonable inferences in favor of 10 the nonmoving party. Thompson v. Davis, 295 F.3d 890, 895 (9th Cir. 2002). 11 III. DISCUSSION 12 Vratsinas argues the complaint should be dismissed for the following reasons: 13 (1) Plaintiff has no standing, (Doc. No. 4-1 at 7); (2) Plaintiff failed to establish this Court’s 14 personal jurisdiction over Vratsinas, (id. at 9); (3) Plaintiff failed to establish that the 15 Southern District of California is a proper venue for this action, (id. at 10); (4) Plaintiff 16 failed to allege sufficient facts to state its claims, (id. at 12). Other VCC Defendants and 17 the individually-named Defendants bring a second motion to dismiss with identical 18 arguments. (Doc. No. 25.) The only difference between the two motions is the personal 19 jurisdiction analysis—discussed separately below. Due to the similarity of the motions, the 20 Court discusses the issues as raised in the first motion to dismiss, (Doc. No. 4). 21 A. Plaintiff Has Not Shown Standing to Pursue Its Claims against Vratsinas 22 Vratsinas purports that, in violation of Article III, Plaintiff has failed to adequately 23 allege that it suffered an injury in fact traceable to Vratsinas’ conduct concerning any 24 particular construction project and therefore this Court should dismiss the Complaint under 25 Rule 12(b)(1). (Doc. No. 14-1 at 7–9.) Plaintiff, as the party invoking federal jurisdiction, 26 is required to establish three elements of standing. Lujan v. Defs. of Wildlife, 504 U.S. 555, 27 561 (1992). First, Plaintiff must show they have suffered an “injury in fact” which is both 28 “concrete and particularized” and “actual or imminent.” Id. at 560. Second, there must be 1 a “causal connection” between the injury and conduct of Vratsinas. Id. Third, it must be 2 likely that a verdict for Plaintiff will redress that injury. Id. An injury is particularized when 3 it “affect[s] the plaintiff in a personal and individual way.” (Id. at 560 n.1.) This Court finds 4 that Plaintiff has failed to identify how Vratsinas’ actions have impacted Plaintiff in such 5 a particular way. 6 In contrast to Defendant’s argument that Plaintiff fails to identify any specific 7 construction projects on which this activity allegedly occurred, (Doc. No. 4-1 at 8), the 8 Court finds that Plaintiff has adequately identified where Defendant’s alleged “schemes” 9 were implemented. (Doc. No. 1 ¶ 2.) However, between the four projects Plaintiff 10 identifies, Plaintiff fails to provide enough facts to explain Plaintiff’s own involvement and 11 interest in the projects. Plaintiff does not disclose if it served as a subcontractor or owner 12 on any of the listed construction projects. Moreover, the Court finds Plaintiff’s position 13 that they are an assignee insufficient. 14 Plaintiff alleges to be the assignee of “any and all existing and potential claims, 15 demands, causes of action, lawsuits, rights of action, expenses, legal fees, damages,” 16 (id. ¶ 2 n.1) and brings this claim on behalf of “all other similarly situated entities who 17 submitted bids as contractors, materialmen or vendors,” (id. ¶ 2), on the identified projects. 18 However, Plaintiff fails to name any assignors or the essential terms of any assignments to 19 support that allegation. See MAO-MSO Recovery II, LLC v. MSP Recovery, LLC, No. CV 20 17-02525, 2017 U.S. Dist. Lexis 193874, at *12 (C.D. Cal. Nov. 2, 2017) (dismissing 21 claims under Rule 12(b)(1) because “the Court is not obliged to accept as true Plaintiffs’ 22 legal conclusions that the assignments exist and are valid; Plaintiffs must allege facts 23 sufficient to support these contentions, such as the identity of the [assignees] . . . the details 24 of the assignments, and the essential terms.”). 25 This Court is not disputing the truth of the claims against Vratsinas or the fraudulent 26 activity that may have occurred. However, the complaint needs more clarity regarding how 27 Plaintiff was both involved and harmed in the projects where Vratsinas’ alleged “schemes” 28 were implemented. The Court finds that Plaintiff’s contention that it “has been deprived of 1 millions, if not billions, of dollars,” (id. ¶ 57), is not enough to establish a particularized 2 injury. 3 Regarding the second element, if Plaintiff can establish their role as assignee or as a 4 project owner of one of the listed projects, the “causal connection” between Vratsinas’ 5 alleged behaviors and the injuries they would have caused a project owner would not be at 6 issue. However, without more facts contributing to Plaintiff’s role as assignee to those who 7 may have suffered an “injury in fact,” or establishing their direct role within the listed 8 projects in which Vratsinas’ alleged misconduct occurs, this Court finds that Plaintiff has 9 not adequately pled their standing. 10 B. Personal Jurisdiction Allegations 11 Due process “constrains a State’s authority to bind a nonresident defendant to a 12 judgment of its courts.” Walden v. Fiore, 571 U.S. 277, 283 (2014). “A nonresident 13 defendant must have ‘certain minimum contacts with [the forum] such that the maintenance 14 of the suit does not offend ‘traditional notions of fair play and substantial justice.’’” Axiom 15 Foods, Inc. v. Acerchem Int’l, Inc., 874 F.3d 1064, 1068 (9th Cir. 2017) (alteration in 16 original) (quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). Courts apply 17 a three-part test to exercise specific jurisdiction over a non-resident defendant: 18 (1) the defendant either “purposefully direct[s]” its activities or “purposefully avails” itself of the benefits afforded by the forum’s laws; (2) the claim “arises 19 out of or relates to the defendant’s forum-related activities; and (3) the 20 exercise of jurisdiction [ ] comport[s] with fair play and substantial justice, i.e., it [is] reasonable.” 21 22 Williams v. Yamaha Motor Co., 851 F.3d 1015, 1023 (9th Cir. 2017) (alterations in 23 original) (quoting Dole Food Co. v. Watts, 303 F.3d 1104, 1111 (9th Cir. 2002)). The 24 burden is on the plaintiff to establish the first two prongs. Axiom Foods, 874 F.3d at 25 1068 (citing Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th Cir. 26 2004)). If the plaintiff satisfies the first two prongs, then the defendant must present a 27 “‘compelling case’ that exercise of jurisdiction would not be reasonable.” CollegeSource, 28 Inc. v. AcademyOne, Inc., 653 F.3d 1066, 1076 (9th Cir. 2011) (quoting Burger King Corp. 1 v. Rudzewicz, 471 U.S. 462, 476–78 (1985)). 2 1. The Court Has Personal Jurisdiction Over Vratsinas 3 Vratsinas purports that Plaintiff has failed to allege facts demonstrating that this 4 Court has either general or specific personal jurisdiction over Vratsinas. (Doc. No. 4-1 at 5 9–10.) Acknowledging that Plaintiff’s argument for general jurisdiction is based on a 6 flawed alter-ego analysis, the Court turns to personal jurisdiction. 7 First, the Court finds that Vratsinas has purposefully availed itself in California by 8 maintaining offices in California, and specifically in Irvine, California, (Doc. No. 1 ¶ 6); 9 and more specifically through its development of The Forum Carlsbad in Carlsbad, 10 California, (id. ¶ 2). Second, Plaintiff’s claim at least partially arises out of Vratsinas’ 11 California–related activities, again, through its involvement with the construction of The 12 Forum Carlsbad in Carlsbad, California. (Id.) Although Vratsinas maintains Plaintiff “fails 13 to allege any facts concerning when and where any particular scheme occurred, much less 14 any facts demonstrating that Vratsinas’ purported forum contacts gave rise to any of 15 Thomas’ claims,” Plaintiff clearly alleged that one of the projects Vratsinas was engaged 16 in was in California. (Doc. No. 4-1 at 16.) Finally, Defendant fails to give any additional 17 reasons—let alone a compelling case—as to why jurisdiction in California would be 18 unreasonable. Thus, the Court finds Plaintiff has established personal jurisdiction over 19 Vratsinas and DENIES Vratsinas’ motion as to this argument. 20 2. Plaintiff Fails to Allege Alter-Ego and Thus Does Not Allege 21 Personal Jurisdiction Over Other Defendants 22 The VCC, LLC, VCC Global, LLC, VCC Construction Corp., Diversified 23 Construction Materials and Services, LLC, Sam Alley and Ryan McClendon Defendants 24 argue Plaintiff failed “to allege any facts concerning when and where any particular scheme 25 allegedly occurred. . . .” (Doc. No. 25-1 at 15.) Plaintiff alleged the schemes occurred in 26 four places: San Antonio, TX, Peachtree Corners, GA, Carslbad, CA, and Huntsville, AL. 27 (Doc. No. 1 ¶ 2.) Plaintiff rests its personal jurisdiction analysis on its alter ego allegations 28 since if Defendants are alter-egos of Vratsinas, then personal jurisdiction can be imputed 1 on them and the individual defendants. 2 Defendants do not specifically argue Plaintiff fails to establish alter ego theory, but 3 rather argue no personal jurisdiction exists generally. (Doc. No. 25-1 at 15.) But Plaintiff’s 4 theory is clear from the face of the complaint. “The existence of a parent-subsidiary 5 relationship is insufficient, on its own, to justify imputing one entity’s contacts with a 6 forum state to another for the purpose of establishing personal jurisdiction.” Ranza v. Nike, 7 Inc., 793 F.3d 1059, 1070 (9th Cir. 2015). “A basic tenet of American corporate law is that 8 the corporation and its shareholders are distinct entities.” Dole Food Co. v. Patrickson, 538 9 U.S. 468, 474 (2003). “However, in certain limited circumstances, the veil separating 10 affiliated entities may be pierced to impute liability from one entity to the other.” Ranza, 11 793 F.3d at 1071. 12 To impute jurisdiction under the alter ego test, a plaintiff “must make out a prima 13 facie case ‘(1) that there is such unity of interest and ownership that the separate 14 personalities [of the two entities] no longer exist and (2) that failure to disregard [their 15 separate identities] would result in fraud or injustice.’” Doe v. Unocal, 248 F.3d 915, 926 16 (9th Cir. 2001) (alterations in original) (quoting AT&T Co. v. Compagnie Bruxelles 17 Lambert, 94 F.3d 586, 591 (9th Cir. 1996)). The “unity of interest and ownership” prong 18 of this test requires “a showing that the parent controls the subsidiary to such a degree as 19 to render the latter the mere instrumentality of the former.” Id. (internal quotation marks 20 omitted). 21 Here, Plaintiff makes only conclusory allegations and formulaic recitations of the 22 law regarding alter ego. For example, Plaintiff alleges “the ALTER EGO DEFENDANTS 23 . . dominated, influenced, and controlled each other and the officers of one another, as well 24 as the business, property, and affairs of each other.” (Doc. No. 1 ¶ 13(a).) Plaintiff fails to 25 allege any of the unity of interest factors Courts consider when assessing the first prong of 26 the alter ego test. See Sandoval v. Ali, 34 F. Supp. 3d 1031, 1040 (N.D. Cal. 2014) (citation 27 omitted). As is now well known, “a formulaic recitation of the elements of a cause of action 28 will not do.” Twombly, 550 U.S. at 555. 1 Accordingly, the Court finds Plaintiff failed to establish general or personal 2 jurisdiction over VCC, LLC, VCC Global, LLC, VCC Construction Corp., Diversified 3 Construction Materials and Services, LLC, Sam Alley and Ryan McClendon and thus 4 GRANTS their motion to dismiss. (Doc. No. 25.) However, the Court also GRANTS 5 Plaintiff leave to amend accordingly. 6 C. Venue is Proper 7 Vratsinas purports that Plaintiff has failed to meet its burden of establishing that 8 venue is proper in the Southern District. (Doc. No. 4-1 at 15–16.) A civil action may be 9 brought where a defendant resides, where “a substantial part of the events . . . giving rise 10 to the claim occurred, or a substantial part of property that is the subject of the action is 11 situated,” or any district in which the defendant can be subjected to personal jurisdiction. 12 28 U.S.C.A. § 1391(b)(1)–(3). 13 Vratsinas argues that Plaintiff has conceded that venue is not proper as not all the 14 Defendants reside in California and that the Complaint does not allege “any facts that even 15 suggest” that part of the events giving rise to Plaintiff’s claim occurred in the Southern 16 District of California. (Doc. No. 4-1 at 16.) Plaintiff responds that venue is proper as a 17 substantial part of Vratsinas’ conduct took place in Carlsbad, California, a city within the 18 Southern District of California. (Doc. No. 6 at 19.) 19 This Court finds that while viewing Plaintiff’s facts as true, at least one of the alleged 20 schemes created by Vratsinas was implemented during construction of The Forum 21 Carlsbad in Carlsbad, California. (Doc. No. 1 ¶ 2.) This establishes the Southern District 22 of California as a proper venue for this action. Plaintiff identified four projects where the 23 alleged wrongful business practices of Vratsinas occurred, one of them being The Forum 24 Carlsbad. (Id.) Although the other three construction projects are found in other states, (id.), 25 this Court finds that Vratsinas involvement with The Forum meets the requirement of a 26 substantial part of the events having occurred in this judicial district. Moreover, because 27 personal jurisdiction was established, venue is proper under 28 U.S.C.A. § 1391(b)(3). 28 1 D. Plaintiff’s Claims against Vratsinas 2 Vratsinas argues that: (1) the RICO allegation must be dismissed for failure to 3 comply with Federal Rule of Civil Procedure 9(b); (2) the Sherman Act claim fails as a 4 matter of law; and (3) Plaintiff failed to allege both negligence claims. 5 1. RICO Claims 6 Vratsinas purports that Federal Rule of Civil Procedure 9(b)’s heightened pleading 7 standard applies to Plaintiff’s first and second cause of action for alleged RICO 8 violations—which Plaintiff has failed to satisfy. (Doc. No. 4-1 at 17.) Accordingly, 9 Vratsinas requests dismissal of the claims. 10 “In alleging fraud or mistake, a party must state with particularity the circumstances 11 constituting fraud or mistake.” Fed. R. Civ. P. 9(b). “Rule 9(b) provides, in pertinent part: 12 ‘In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall 13 be stated with particularity.’ The rule ‘requires a pleader of fraud to detail with particularity 14 the time, place, and manner of each act of fraud, plus the role of each defendant in each 15 scheme.’” Mostowfi v. i2 Telecom Int’l, Inc., 269 F. App’x 621, 624 (9th Cir. 2008) 16 (quoting Lancaster Cnty. Hosp. v. Antelope Valley Hosp. Dist., 940 F.2d 397, 405 (9th Cir. 17 1991)). 18 Plaintiff’s first claim is brought under 18 U.S.C. § 1962(c), which reads: “It shall be 19 unlawful for any person employed by or associated with any enterprise engaged in, or the 20 activities of which affect, interstate or foreign commerce, to conduct or participate, directly 21 or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering 22 activity or collection of unlawful debt.” Plaintiff’s first claim is based in part on Vratsinas’ 23 alleged commission of mail fraud. (Doc. No. 1 ¶ 52.) Given these are allegations of fraud 24 against Vratsinas, this Court finds that Plaintiff’s RICO allegations must comply with 25 9(b)’s heightened pleading standard. See State Compensation Insurance Fund v. Capen, 26 No. SACV 15–1279 AG (CWx), 2015 WL 13322034, at *2 (C.D. Cal. 2015) (“Fraud 27 claims—including UCL and RICO claims that are based on fraud—are subject to 28 heightened pleading requirements under Rule 9(b) of the Federal Rules of Civil 1 Procedure.”). 2 Plaintiff asserts the Complaint sufficiently differentiates the roles that each 3 defendant plays in the wrongful conduct alleged. (Doc. No. 6 at 22.) However, Plaintiff’s 4 frequent use of “ENTITY DEFENDANTS” suggests that every named defendant was 5 involved in nearly every alleged scheme and all collusive practices. This term prevents the 6 Court from being able to distinguish which defendant was engaged in what wrongful 7 conduct, more so if every named defendant was involved, it prevents the Court from 8 understanding how they played a role. 9 Additionally, although the facts regarding how the alleged schemes operated and 10 could have been applied are comprehensive and provide an understandable explanation of 11 each scheme’s process, there is a lack of detail regarding how or when each scheme was 12 applied to the named projects. Therefore, without facts detailing how each defendant, 13 including Vratsinas, was uniquely involved in each scheme, and how and when those 14 schemes were applied to which projects, this Court finds that Plaintiff has not adequately 15 pled their RICO claims under 9(b)’s heightened standard. Thus, these causes of action are 16 DISMISSED with leave to amend. 17 2. Sherman Antitrust Violations 18 Vratsinas purports that Plaintiff’s third cause of action for alleged violation of 19 Section 1 of the Sherman Act has not been adequately pled since Plaintiff fails to identify 20 that Vratsinas conspired with any other party to unreasonably restrain trade or identify 21 injury beyond Plaintiff itself. (Doc. No. 4-1 at 23.) Accordingly, Vratsinas requests 22 dismissal of the claim under Rule 12(b)(6). 23 The Sherman Antitrust Act provides, “[e]very contract, combination in the form of 24 trust or otherwise, or conspiracy, in restraint of trade or commerce among the several 25 States, or with foreign nations, is declared to be illegal.” 15 U.S.C. § 1. “To establish a 26 section 1 violation, Plaintiff must ‘prove three elements: (1) an agreement or conspiracy, 27 (2) resulting in an unreasonable restraint of trade, and (3) causing ‘antitrust injury.’’” 28 Rickards v. Canine Eye Registration Found., 783 F.2d 1329, 1332 (9th Cir. 1986) (quoting 1 Gough v. Rossmoor Corp., 585 F.2d 381, 386 (9th Cir. 1978)). However, economic injury 2 to a competitor does not equal injury to competition. Cascade Cabinet Co. v. W. Cabinet 3 & Millwork Inc., 710 F.2d 1366, 1373 (9th Cir. 1983). In consideration of a violation of 4 antitrust laws, it is injury to the market, not to individuals, that is significant. Klamath-Lake 5 Pharm. Ass’n v. Klamath Med. Serv. Bureau, 701 F.2d 1276, 1292 (9th Cir. 1983). 6 Vratsinas contends that Plaintiff has undermined its allegations by suggesting that 7 the unreasonable restraint on trade occurred between Vratsinas and its self-created 8 “ALTER EGO SHAM ENTITIES,” and therefore Vratsinas cannot be held liable for 9 conspiracy within its own company. (Doc. No. 4-1 at 19–20.) However, Plaintiff provides 10 facts that allege agreements between Vratsinas and “POCKET SUBCONTRACTORS,” 11 described as “legitimate subcontractor[s]” who “were ‘in’ on this scheme and happy to 12 actively participate in order to be awarded work.” (Doc. No. 1 ¶¶ 20, 21.) Therefore, as the 13 “POCKET SUBCONTRACTORS” have been described as businesses independent of 14 Vratsinas, the Court finds that Vratsinas’ alleged agreements extend to companies besides 15 its own. 16 Vratsinas also takes the position that Plaintiff has failed to plead an injury beyond 17 itself and is required to provide facts that Vratsinas’ activity had an anticompetitive effect 18 on the market in which the Plaintiff is engaged. (Doc. No. 4-1 at 20.) 19 Plaintiff provided facts that through the operations of the alleged schemes, Vratsinas 20 has predetermined which subcontractor’s bids would be accepted for work on projects, 21 which in turn has a “pernicious anticompetitive affect and served to stifle the free bidding 22 process that should have been in place” for those projects. Although, as the court has 23 addressed, Plaintiff needs to provide more facts into its role within the projects, these facts 24 about alleged manipulation of the subcontractors bidding process create an injury that 25 would affect project owners and alternative subcontractor companies alike, which therefore 26 extends injury beyond Plaintiff, regardless of which role Plaintiff plays. Also, if as 27 suggested by Plaintiff this activity has occurred at all of the listed projects (Doc. No. 1 ¶ 2), 28 this injury extends to at least four states. 1 Additionally, this Court finds that Plaintiff has provided facts that indicate Vratsinas’ 2 alleged activity involved a form of bid-rigging through concealing the lowest bidding 3 subcontractor from the project owner, and instead of displaying a preselected subcontractor 4 as the “winning” bid. (Doc. No. 1 ¶ 19.) Bid-rigging is a per se violation of the Sherman 5 Act. United States v. Joyce, 895 F.3d 673, 677 (9th Cir. 2018). 6 Because this conduct has been previously held to constitute an unfair restraint on 7 free competition, the facts indicate collusion between Vratsinas and outside companies, 8 and the injury extends beyond plaintiff alone, this Court finds that Plaintiff has sufficiently 9 pled their third claim to survive dismissal under Rule 12(b)(6). 10 3. Plaintiff’s Negligence Claims 11 Vratsinas purports that Plaintiff’s fourth and fifth causes of action for professional 12 negligence and negligence have not been adequately pled. (Doc. No. 4-1 at 21.) 13 Accordingly, Vratsinas requests dismissal of the claims under Rule 12(b)(6). 14 Under California law, the elements of a negligence cause of action are: (1) the 15 existence of a duty to exercise due care; (2) breach of that duty; (3) causation; and 16 (4) damages. In re Sony Gaming Networks & Customer Data Sec. Breach Litig., 903 F. 17 Supp. 2d 942, 959 (S.D. Cal. 2012). 18 The elements of a claim for professional negligence cause of action are: (1) the duty 19 of the professional to use such skill, prudence and diligence as other members of his 20 profession commonly possess and exercise; (2) a breach of that duty; (3) a proximate causal 21 connection between the negligent conduct and the resulting injury; and (4) actual loss or 22 damage resulting from the professional’s negligence. In re Daisy Sys. Corp., 97 F.3d 1171, 23 1175 (9th Cir. 1996). 24 Vratsinas purports that Plaintiff has only generally alleged that Vratsinas owed it 25 duties of care but has not alleged a specific relationship with Vratsinas giving rise to a duty 26 of care. (Doc. No. 4-1 at 20.) 27 Plaintiff depicts it was owed a duty as Vratsinas “developed, constructed, managed 28 or otherwise controlled” numerous projects with Plaintiff. (Doc. No. 1 ¶ 2; Doc. No. 6 at 1 27.) Plaintiff further describes that duty within the Complaint’s fourth and fifth causes of 2 action. (Doc. No. 1 ¶¶ 74, 78.) 3 The difficulty with determining the existence of duty for these claims returns to the 4 lack of facts provided on Plaintiff’s specific role in the projects constructed by Vratsinas. 5 As previously discussed, Plaintiff’s contention that they are an assignee is not currently 6 accepted, and without more facts contributing to Plaintiff’s contention, or facts establishing 7 Plaintiff’s direct role within the listed projects in which Vratsinas’ alleged misconduct 8 occurs, this Court finds that it cannot determine that Plaintiff was owed a duty of care by 9 Vratsinas to support claims of negligence and professional negligence. Therefore, this 10 Court finds that Plaintiff has not adequately pled its Fourth and Fifth Causes of Action for 11 Professional Negligence and Negligence, and the claims will be dismissed under Rule 12 12(b)(6). 13 IV. LEAVE TO AMEND 14 Courts are urged to grant leave to amend freely when justice so requires. Fed. R. 15 Civ. P. 15(a)(2). Leave to amend should be granted if it appears possible that the plaintiff 16 can correct the complaint’s deficiency. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 17 701 (9th Cir. 1988). Thus, the Court GRANTS leave to amend for Plaintiff’s to provide 18 more facts regarding: 19 (1) Plaintiff’s role as assignee or personal involvement on one of the listed projects 20 to establish the “causal connection” between Vratsinas’ alleged behaviors and 21 themselves for proper standing. 22 (2) How the Court has general or personal jurisdiction over VCC, LLC, VCC Global, 23 LLC, VCC Construction Corp., Diversified Construction Materials and Services, 24 LLC, Sam Alley and Ryan McClendon whether through alter ego liability or 25 otherwise. 26 (3) How each defendant was uniquely involved in each scheme, and how and when 27 those schemes were applied to which projects to adequately plead their RICO 28 claims under 9(b)’s heightened standard. 1 (4) Plaintiffs role as assignee or personal involvement on one of the listed projects 2 constructed by Defendants to establish Plaintiff was owed a duty of care by 3 Defendants to support claims of negligence and professional negligence. 4 Vv. CONCLUSION 5 The Court GRANTS IN PART AND DENIES IN PART Defendants’ motions to 6 || dismiss. (Docs. No. 4, 25.) The Court finds Plaintiff adequately alleged Sherman Antitrust 7 || violations and established personal jurisdiction over Vratsinas. However, the Court finds 8 ||that Plaintiff has failed to allege standing, this Court’s specific jurisdiction over the other 9 || Defendants, or adequately plead it’s first, second, fourth, and fifth claims. Accordingly, 10 ||those claims are dismissed. Nevertheless, the Court GRANTS Plaintiff leave to amend. 11 || The first amended complaint is due by August 30, 2019. 12 IT IS SO ORDERED. 13 Dated: August 14, 2019 | □□ iz : LE 14 Hon, Anthony J.Battaglia 15 United States District Judge 16 17 18 19 20 21 22 23 24 25 26 27 28 17