856 F.2d 1365 (9th Cir. 1988), 87-5819, Blake v. Dierdorff

Docket Nº:87-5819.
Citation:856 F.2d 1365
Party Name:Aaron BLAKE; Ruth Blake; Aaron Blake, D.D.S., P.C. Employees Pension Trust; Aaron Blake, D.D.S., P.C. Retirement Trust, Plaintiffs-Appellants, v. Daniel W. DIERDORFF; Harry L. Summers; Tadashi Fujita; John McKenna Case; Allan Koljonen; Richard C. Raimann; Leff & Mason; Ernest Leff; John Grosvenor; Van D. Greenfield; Sun Savings and Loan Association
Case Date:September 08, 1988
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Page 1365

856 F.2d 1365 (9th Cir. 1988)

Aaron BLAKE; Ruth Blake; Aaron Blake, D.D.S., P.C.

Employees Pension Trust; Aaron Blake, D.D.S.,

P.C. Retirement Trust, Plaintiffs-Appellants,

v.

Daniel W. DIERDORFF; Harry L. Summers; Tadashi Fujita;

John McKenna Case; Allan Koljonen; Richard C. Raimann;

Leff & Mason; Ernest Leff; John Grosvenor; Van D.

Greenfield; Sun Savings and Loan Association; Arthur Young

& Company; and Kenneth Clare, Defendants-Appellees.

No. 87-5819.

United States Court of Appeals, Ninth Circuit

September 8, 1988

Argued and Submitted Jan. 6, 1988.

Page 1366

Simon J. Freedman and William S. Lerach, Milberg Weiss Bershad Specthrie & Lerach, San Diego, Cal., for plaintiffs-appellants.

Scott L. Metzger, Duckor & Spradling, Alex C. McDonald, McDonald, Hecht & Solberg, David Pendarvis, Gibson, Dunn &

Page 1367

Crutcher, San Diego, Cal., Eugene R. Erbstoesser, Arthur Young & Company, Associate General Counsel, New York City, Michael I. Goode, Newport Beach, Cal., for defendants-appellees.

Daniel W. Dierdorff, La Jolla, Cal., in pro. per.

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

Before FERGUSON, BEEZER and LEAVY, Circuit Judges.

LEAVY, Circuit Judge:

The appellants, Aaron and Ruth Blake and their retirement and pension trusts (Blake), appeal the district court's dismissal of their multiple defendant civil RICO action and their claim under section 17(a) of the Securities Act of 1933, 15 U.S.C. Sec. 77q(a). Subsequent to our decision in In re Washington Public Power Supply System Securities Litigation, 823 F.2d 1349 (9th Cir.1987), which holds there is no private right of action under section 17(a), the appellants have withdrawn the appeal of the dismissal of their section 17(a) claim. We affirm the dismissal of defendants Arthur Young, Kenneth Clare, Greenfield, and Grosvenor on the RICO claim.

FACTS

Blake made numerous purchases of stock in Sun Savings & Loan Association (Sun Savings) between February 1984 and October 1984. After the purchases, the stock value declined until July 18, 1986, when the Federal Home Loan Bank Board placed Sun Savings in receivership and appointed the Federal Savings and Loan Insurance Corporation (FSLIC) as its sole receiver for the purpose of liquidation. Blake filed an action in California Superior Court against Sun Savings, the accounting firm of Arthur Young & Company and its employee, Kenneth Clare (Arthur Young), the law firm of Leff & Mason and its attorneys, John Grosvenor and Ernest Leff, members of the Sun Savings Board of Directors Allan Koljonen, John Grosvenor, Van Greenfield, Harry Summers, Tadashi Fujita, John Case, and Richard Raimann, and Daniel Dierdorff, a founder, president, chief executive officer, and chair of the Board of Directors of Sun Savings. 1 The FSLIC was substituted for Sun Savings. The case was removed to the United States District Court for the Southern District of California.

Blake filed an amended complaint in federal court, asserting five separate claims: fraud and deceit against all defendants (Count I), negligent misrepresentation against all defendants (Count II), violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. Sec. 1962(c) and (d), against Sun Savings, Leff & Mason, and Arthur Young (Count III), RICO violations against all defendants except Sun Savings (Count IV), and violation of section 17(a) of the Securities Act of 1933 (Count V). In support of these claims Blake alleged that during 1983 and 1984 the defendants conspired and schemed to defraud Blake into purchasing and holding Sun Savings stock. The complaint alleges that the scheme and conspiracy were effectuated over a fourteen month period through misrepresentations made in person, over the telephone, and in press releases, annual and quarterly reports, and offering statements concerning Sun Savings' financial condition and the advisability of owning Sun Savings stock.

The district court dismissed, without opposition, Blake's claims against the FSLIC. The remaining defendants moved for dismissal of the complaint pursuant to Federal Rules of Civil Procedure 9(b) for lack of specificity in the allegations of fraud and 12(b)(6) for failure to state a claim upon which relief could be granted. Arthur Young argued in support of its motion to dismiss that its single audit did not constitute a pattern of racketeering activity. The district court dismissed the RICO claims against Arthur Young "for reasons given by counsel." It dismissed the RICO claims against the other defendants because Blake "failed to allege that any defendant

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engaged in or conspired to engage in a 'pattern of racketeering activity' as required by 18 U.S.C. Sec. 1962." The district court held that two or more schemes were necessary to meet the pattern requirement. Because Blake had alleged only one scheme, the court found that the requirement was not met. It also found Blake had consented to dismissal of Count III, one of the RICO claims. Because the FSLIC was no longer a party, and because Counts I and II alleged only claims that arose under state law, the district court remanded the action back to the Superior Court of San Diego County.

Blake timely appealed the dismissal of Counts III and IV, the RICO claims, and Count V, the Securities Act claim. The Securities Act claim has been withdrawn. Blake does not argue on appeal that the district court erroneously found the appellants consented to the dismissal of Count III. Therefore, only Count IV, a RICO claim, is before us.

STANDARD OF REVIEW

This court reviews de novo the district court's dismissal for failure to state a claim. Gibson v. United States, 781 F.2d 1334, 1337 (9th Cir.1986), cert. denied, 479 U.S. 1054, 107 S.Ct. 928, 93 L.Ed.2d 979 (1987). All material...

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