Miller v. Yokohama Tire Corp.

• Decision Date: 12 January 2004
• Docket Number: No. 02-56722.,02-56722.
• Citation: 358 F.3d 616
• Parties: Christopher MILLER, Plaintiff-Appellant, v. YOKOHAMA TIRE CORPORATION, a California corporation; Stephen L. Kessing; James MacMaster; Rick Brennan; Philip L. Siracuse; Chikara Cheech Yamauchi; Highway Performance Company, Limited, a California corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

358 F.3d 616

Christopher MILLER, Plaintiff-Appellant, v. YOKOHAMA TIRE CORPORATION, a California corporation; Stephen L. Kessing; James MacMaster; Rick Brennan; Philip L. Siracuse; Chikara

Cheech Yamauchi; Highway Performance Company, Limited, a California corporation, Defendants-Appellees.

No. 02-56722.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted November 3, 2003 — Pasadena, California.

Filed January 12, 2004.

William L. Zeltonoga and Richard Ross, Los Angeles, CA, for the plaintiff-appellant.

Don A. Proudfoot, Jr., James H. Broderick, Jr., and Benjamin E. Goldman, Squire, Sanders & Dempsey L.L.P., Los Angeles, CA, for the defendants-appellees.

Appeal from the United States District Court for the Central District of California, John F. Walter, District Judge, Presiding. D.C. No. CV-02-02899-JFW.

Before: BRIGHT,^* O'SCANNLAIN, and McKEOWN, Circuit Judges.

Opinion by Judge McKeown.

OPINION

McKEOWN, Circuit Judge.

This case involves an effort to transform a California state law wage and hour claim into a federal RICO claim under 18 U.S.C. § 1962(c) and (d). Christopher Miller alleges that he is a victim of a mail fraud scheme by Yokohama Tire Corporation and its managers, who misrepresented his entitlement to overtime pay and consequently underpaid him. The district court dismissed Miller's RICO claims under Federal Rule of Civil Procedure 12(b)(6), without leave to amend, and remanded to state court his remaining state law claims. Because Miller's complaint, as a matter of law, does not allege actionable fraud under the common law, we affirm. In affirming, we point out that Miller is not without a remedy in state court. We decline to expand RICO's reach to transform the federal courts into a general venue for ordinary state wage disputes.

FACTUAL AND PROCEDURAL BACKGROUND

Christopher Miller worked for Yokohama Tire Corporation ("Yokohama") from 1990 until his termination in 2001. Miller alleges that throughout his eleven years of employment he was ordered to work many overtime hours for which he was never paid additional compensation. Miller claims that Rick Brennan, Stephen Kessing, James MacMaster, and other high-ranking Yokohama employees (collectively "Yokohama Managers") falsely represented to him and other employees that they were not entitled to overtime pay because they were salaried. Finally, Miller alleges that Yokohama Managers made oral misrepresentations as to overtime entitlement to other employees, who were also victimized.

Miller is not an attorney; he was not familiar with the law or regulations concerning employee status and entitlement to overtime pay. Accordingly, he alleges that he trusted and placed confidence in his employer, who he argues had superior knowledge concerning his status and entitlement to overtime pay. In sum, Miller alleges that the misrepresentations and failure to pay overtime wages constitute a fraudulent scheme.

Miller further alleges that Yokohama mailed him and other employees their paychecks or pay stubs twice monthly and W-2s annually. For employees who opted for direct deposit, the same bi-monthly pattern occurred via wire transfers. Miller alleges that the scheme to deny overtime pay was furthered through these paycheck-related mailings and wire transfers.

Based on these predicate acts of mail and wire fraud, Miller alleges that Yokohama and the Yokohama Managers violated RICO, 18 U.S.C. § 1962(c), by conducting and operating the affairs of Yokohama through a fraudulent scheme to deny overtime pay to Miller and other employees. Miller also alleges that these parties conspired with each other to violate RICO, 18 U.S.C. § 1962(d).¹

Miller filed his original complaint in Los Angeles Superior Court. The complaint contained twenty-two causes of action. All but the two RICO causes of action were state law claims.

Yokohama removed the case to the United States District Court for the Central District of California. The case was originally assigned to the Honorable Stephen V. Wilson. Once in federal court, Yokohama filed a Rule 12(b)(6) motion to dismiss Miller's RICO causes of action. In response, Miller filed his first amended complaint. Yokohama then filed a reply to the pending motion, addressing the minimal changes reflected in Miller's amended complaint. Yokohama also filed a second motion to dismiss directed to Miller's amended complaint. After Miller filed his amended complaint, Judge Wilson presided over a previously scheduled hearing on the original motion to dismiss and denied the motion as moot in light of the amended complaint.²

The case was then transferred to the Honorable John F. Walters, who took the pending motion on the amended complaint under submission. Judge Walters granted the motion to dismiss the RICO claims with prejudice, and without leave to amend, and remanded the remaining state law claims to the Los Angeles Superior Court. Miller now appeals the dismissal of his RICO claims.

DISCUSSION

I. RICO CLAIMS AGAINST YOKOHAMA TIRE CORPORATION

We review de novo the district court's dismissal of Miller's RICO claims for failure to state a claim pursuant to Rule 12(b)(6). See Cervantes v. United States, 330 F.3d 1186, 1187 (9th Cir.2003). A complaint should not be dismissed, however, unless it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim that would entitle the plaintiff to relief. No. 84 Employer-Teamster Joint Council v. Am. W. Holding Corp., 320 F.3d 920, 931(9th Cir.2003).

Miller names Yokohama as a defendant in his RICO action. Miller does not claim that Yokohama is directly liable, but rather premises Yokohama's liability on a respondeat superior theory. The threshold issue, therefore, is whether Yokohama can be vicariously liable for its employees' RICO violations. As a matter of established Ninth Circuit law, it cannot. In Brady v. Dairy Fresh Products Co., 974 F.2d 1149(9th Cir.1992), we held "that an employer that is benefited [sic] by its employee or agent's violations of section 1962(c) may be held liable under the doctrines of respondeat superior and agency when the employer is distinct from the enterprise." Id. at 1154 (emphasis added). Vicarious liability "is inappropriate when the [employer] is the RICO enterprise." Id. Miller names Yokohama as both the employer and the RICO enterprise. Because Yokohama cannot be held liable under the doctrine of respondeat superior, the district court's dismissal as to Yokohama was proper.

II. RICO CLAIMS AGAINST YOKOHAMA MANAGERS

The district court's dismissal of Miller's remaining § 1962(c) and (d) RICO claims against the Yokohama Managers was also proper. Because he fails to properly allege any predicate acts of mail or wire fraud, Miller's complaint does not state any claim for which relief can be granted under RICO.

"Liability under § 1962(c) requires (1) the conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." Sun Sav. & Loan Ass'n v. Dierdorff, 825 F.2d 187, 191 (9th Cir.1987) (citing Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985)). "`Racketeering activity' is defined in 18 U.S.C. § 1961(1)(B) as including any act `indictable' under certain enumerated federal criminal statutes, including 18 U.S.C. § 1341, which makes mail fraud a criminal offense, and 18 U.S.C. § 1343, which makes wire fraud a crime." Schreiber Distrib. Co. v. ServWell Furniture Co., Inc., 806 F.2d 1393, 1399 (9th Cir.1986).

Because Miller's complaint satisfies the first three RICO elements of the "conduct of an enterprise through a pattern," we are left to analyze whether he has stated a claim of racketeering activity through mail fraud. Miller contends that every time the Yokohama Managers sent him or other employees a paycheck or W-2 amounted to a predicate act of mail or wire fraud.³ He argues, that taken together, the thousands of mailings amounted to a pattern of racketeering activity.

To allege a violation of mail fraud under § 1341, "it is necessary to show that (1) the defendants formed a scheme or artifice to defraud; (2) the defendants used the United States mails or caused a use of the United States mails in furtherance of the scheme; and (3) the defendants did so with the specific intent to deceive or defraud." Schreiber, 806 F.2d at 1400 (citations omitted). Miller alleges that the Yokohama Managers formed a scheme to defraud him and other Yokohama employees through misrepresenting the law, and furthered that scheme through the mailing of paychecks and W 2s. Miller's complaint falls short because it does not state actionable fraud.

The threshold issue we address is Miller's argument that an employer's misrepresentation of the law to an employee constitutes actionable fraud. In Neder v. United States, 527 U.S. 1, 119 S.Ct. 1827 144 L.Ed.2d 35 (1999), the Supreme Court underscored that the term "defraud" in the mail fraud statute is given its established common law meaning. Id. at 21-25, 119 S.Ct. 1827. As a result, we must look to common law to determine whether Miller has stated a claim of actionable fraud. See United States v. Kenrick, 221 F.3d 19, 28 (1st Cir.2000) (en banc) (referring to common law definitions of fraud and noting that the Neder Court relied on the Restatement for its definition of the materiality element of fraud). Under common law, Miller has failed to state a claim for actionable fraud.

"It is ... well settled, as a general rule, that fraud cannot be predicated upon misrepresentations of law or misrepresentations as to matters of law." Am.Jur.2d of Fraud and Deceit § 97 (2001). Statements of domestic law are normally regarded as expressions of opinion which are generally not actionable in fraud even if they are false. Id. The Yokohama Managers' statements did not include express or implied misrepresentations of fact. The Restatement explains that where a misrepresentation of law is only one of opinion, rather than one that...