8 F.3d 1341 (9th Cir. 1993), 92-15638, Baumer v. Pachl

Docket Nº:92-15638.
Citation:8 F.3d 1341
Party Name:Bus.Disp.Guide 8424 Hannelore BAUMER, et al., Plaintiffs-Appellants, v. James P. PACHL and Gordon L. Yow, Defendants-Appellees.
Case Date:November 02, 1993
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

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8 F.3d 1341 (9th Cir. 1993)

Bus.Disp.Guide 8424

Hannelore BAUMER, et al., Plaintiffs-Appellants,


James P. PACHL and Gordon L. Yow, Defendants-Appellees.

No. 92-15638.

United States Court of Appeals, Ninth Circuit

November 2, 1993

Argued and Submitted Aug. 11, 1993.

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Robert E. Noel, Noel & Knoller, San Francisco, CA, for plaintiffs-appellants.

William Weiner, Law Offices of William Weiner, San Francisco, CA, for defendant-appellee Gordon L. Yow.

William S. Kronenberg, Murphy, Pearson, Bradley & Feeney, for defendant-appellee James A. Pachl.

Appeal from the United States District Court for the Northern District of California.

Before: REINHARDT and LEAVY, Circuit Judges, and MERHIGE, Senior District Judge. [*]

MERHIGE, Senior District Judge:

The matter before the Court concerns the interpretation and application of §§ 1962(c), (d) of the Racketeer Influenced and Corrupt Organizations (RICO) chapter of the Organized Crime Control Act of 1970, Pub.L. 91-452, Title IX, 84 Stat. 941, as amended, 18 U.S.C. §§ 1961-1968 (1988 ed. and Supp. II). Plaintiffs/appellants are some of approximately eighty investors in a California limited partnership known as "Golden Hills Estates" ("Golden Hills") formed by non-defendants Emery Erdy and a California corporation, Estate Planning Associates, Inc. (EPA). 1 The complaint alleges that in November 1976 Erdy and EPA commenced public sales of fractional partnership interests in "Klamath Country Reserve." In April 1981 Erdy and EPA began public sales of limited partnership interests in Golden Hills, allegedly in an effort to make payment to the Klamath plaintiffs and others. In 1982, the California Department of Corporations commenced an investigation into the sales by Erdy and EPA of limited partnership interests in Golden Hills. The Commission concluded that the transactions constituted illegal sales of unregistered securities and demanded that no further sales be undertaken.

Soon thereafter Erdy and EPA enlisted the legal help of attorney James Pachl, a defendant in the instant case. Appellants allege that between April and September, 1982 Pachl undertook by use of the United States mail numerous efforts to perpetuate the alleged fraud, including the preparation of two letters in September 1982 to the Department of Corporations and other persons and entities, allegedly designed to forestall and cover-up the fraud by minimizing or mischaracterizing the allegedly improper activities of EPA and Erdy. In addition, appellants allege that in 1982 Pachl knowingly filed a false partnership agreement in which he inflated the number of limited partners and mailed to the limited partners copies of the agreement, to create the false impression

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that Golden Hills was formed and operated in accordance with law.

In September, 1983, Erdy and EPA enlisted the help of defendant Gordon Yow, a licensed real estate appraiser. Yow thereafter represented that the appraised value of the property was five million dollars. In so doing, appellants assert, Yow disregarded numerous geologic and zoning considerations that significantly affected the market value of the property. This appraisal, appellants allege, was then utilized to enhance the perceived attractiveness of the Golden Hills property by means of communicating this information by mail to present and future investors.

On March 10, 1987, Pachl assisted Erdy in bankruptcy proceedings to obtain Chapter 7 relief for EPA and sent two letters to the limited partners in this regard in March and April 1987. In the letter dated March 18, 1987, Pachl allegedly represented to limited partners that there existed no assets other than the remaining part of the property in Golden Hills. Appellants allege that Pachl had no reasonable basis to so represent and did so with the intent to discourage the limited partners from pursuing legal action against Erdy and EPA. Appellants assert that more generally, between October, 1982 and March, 1987, Erdy and EPA continued the operation of the enterprise, with the assistance of Pachl.

On March 11, 1991, plaintiffs/appellants filed the instant action, alleging RICO violations, along with pendant state claims. Appellants sought redress against two parties: (1) attorney James Pachl, who participated in the formation of the partnership and the alleged fraudulent activities of Golden Hills, allegedly in violation of federal mail fraud and securities statutes, predicate acts under § 1962(c), and the RICO conspiracy provision § 1962(d) and (2) real estate appraiser Gordon Yow, who in alleged reckless disregard of the truth permitted the Golden Hills fraud to be sustained by overstating the value of the property, in violation of the RICO conspiracy provision, § 1962(d).

The United States District Court for the Northern District of California, Judge Lynch presiding, granted defendants' respective Rule 12(b)(6) motions on the RICO counts. 2

A dismissal for failure to state a claim for relief is reviewed de novo. Ft. Vancouver Plywood Co. v. United States, 747 F.2d 547, 552 (9th Cir.1984). The Court shall affirm the dismissal of the complaint only if "it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984). Finding no error in the district court's determinations, we affirm. 3

As noted, the district court dismissed appellants' claim against appellee Pachl based on § 1962(c). Section 1962(c) makes it unlawful "for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of an unlawful debt." 18 U.S.C. § 1962(c) (1984 & Supp.1993). In dismissing the claim the district court concluded that the § 1962(c) claim as to Pachl "doesn't allege pattern, doesn't allege continuity and there's no--he has to show--for RICO he has to show there was a knowing scheme with an agreed upon goal and intent to defraud. There's no evidence of continuity. No evidence of any scheme that he's involved in."

In Reves v. Ernst & Young, --- U.S. ----, 113 S.Ct. 1163, 122 L.Ed.2d 525 (1993), the

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Supreme Court provided its most recent interpretation of § 1962(c). In Reves, purchasers of demand notes sued Ernst & Young, accountants employed by a farmer's cooperative. The gravamen of the complaint was that...

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