Kim v. Kimm

• Decision Date: 27 February 2018
• Docket Number: Docket Nos. 16-2944,August Term, 2017,16-3115
• Citation: 884 F.3d 98
• Parties: Daniel KIM, Plaintiff–Appellant–Cross–Appellee, v. Michael S. KIMM d/b/a Kimm Law Firm, Michael–Hyun W. Lee, Hyung Suk Choi a/k/a Stephen Choi, Chul Ho Park a/k/a/ Charlie Park, Jin Young Chung a/k/a Jamie Chung, Charlie and You, Inc. d/b/a Sik Gaek, Swan U.S.A., Inc. d/b/a Sik Gaek, Defendants–Appellees–Cross–Appellants, Michael–Hyun W. Lee, Defendant–Appellee, Hyung Suk Choi, AKA Stephen Choi, Defendant.
• Court: U.S. Court of Appeals — Second Circuit

884 F.3d 98

Daniel KIM, Plaintiff–Appellant–Cross–Appellee,

v. Michael S. KIMM d/b/a Kimm Law Firm, Michael–Hyun W. Lee, Hyung Suk Choi a/k/a Stephen Choi, Chul Ho Park a/k/a/ Charlie Park, Jin Young Chung a/k/a Jamie Chung, Charlie and You, Inc. d/b/a Sik Gaek, Swan U.S.A., Inc. d/b/a Sik Gaek, Defendants–Appellees–Cross–Appellants,Michael–Hyun W. Lee, Defendant–Appellee,Hyung Suk Choi, AKA Stephen Choi, Defendant.

Docket Nos. 16-2944

16-3115

August Term, 2017

United States Court of Appeals, Second Circuit.

Submitted: October 23, 2017

Decided: February 27, 2018

Daniel Kim, Haworth, NJ, Plaintiff–Appellant–Cross–Appellee, pro se.

Michael S. Kimm, Adam Garcia, Kimm Law Firm, Englewood Cliffs, NJ, for Defendants–Appellees–Cross–Appellants.

Before: Jacobs, Sack, and Parker, Circuit Judges.

Sack, Circuit Judge:

The plaintiff Daniel Kim brings this action pursuant to the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961, et seq. , alleging that the defendants engaged in a scheme to fraudulently bring suit against him for, inter alia , trademark infringement. The defendants moved to dismiss the action for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), arguing that their prior acts, as part of litigation they brought against the plaintiff, do not constitute predicate acts for purposes of RICO. Kim subsequently moved to disqualify defendant Michael S. Kimm as counsel for the defendants and sought leave to further amend his amended complaint.

The United States District Court for the Eastern District of New York (Allyne R. Ross, Judge ) dismissed Kim's action for failure to state a claim, agreeing with the defendants that Kim could not sustain a RICO action based on the defendants' prior litigation activities. The district court also denied Kim's motion for leave to amend and to disqualify Kimm as counsel for the defendants. The defendants then moved for sanctions pursuant to Federal Rules of Civil Procedure Rule 11. The district court denied the motion.

Kim, now proceeding pro se , appeals the district court's judgment dismissing his action and the district court's denial of his motions for leave to amend and to disqualify Kimm. Kimm and his co-defendants cross-appeal, challenging the district court's denial of sanctions against Kim. We agree with the district court that the alleged litigation activities do not constitute RICO predicate acts. We also conclude that the district court did not abuse its discretion in denying Kim leave to amend, Kim's motion to disqualify, and the defendants' motion for sanctions. The judgment of the district court is therefore affirmed.

BACKGROUND

I. The Sik Gaek I Lawsuit

The instant action arises from an earlier litigation, Sik Gaek, Inc. v. Yogi's II, Inc., et al. , No. 10-CV-4077 (ARR) (E.D.N.Y. 2010) ("Sik Gaek I "), which was filed in the United States District Court for the Eastern District of New York on September 7, 2010. In Sik Gaek I , Sik Gaek, Inc., the owner and operator of a restaurant, sued Daniel Kim and the restaurant Kim owned, Yogi's II, Inc., over the use of a trademark that Sik Gaek, Inc. allegedly owned. Sik Gaek, Inc. alleged that Kim and Yogi's II, Inc. had failed to pay a $2 million fee pursuant to a trademark license agreement and that, "in a sinister scheme," Kim had attempted to circumvent the license and register the trademark himself. Appellant App'x at 48–52. Sik Gaek, Inc. brought claims against Kim and Yogi's II, Inc. for, inter alia , breach of contract, fraudulent trademark registration, and trademark infringement. The district court granted summary judgment in favor of the defendant Kim on August 14, 2014. Sik Gaek, Inc. v. Yogi's II, Inc. , 2014 WL 4063403, 2014 U.S. Dist. LEXIS 113165 (E.D.N.Y. Aug. 14, 2014). On August 21, 2014, the remaining claims against the defendant Yogi's II, Inc. were dismissed by agreement of the parties.

II. District Court Proceedings

On August 15, 2015, Daniel Kim, a lawyer and a defendant in Sik Gaek I , filed the instant action, bringing claims against parties in the Sik Gaek I lawsuit: the owner of Sik Gaek, Inc., his wife and business partner, their two attorneys, and an accountant. In his amended complaint, Kim alleges that the defendants were members of two criminal enterprises that conspired to sue him for trademark infringement and breach of contract in Sik Gaek I . According to Kim, the Sik Gaek I lawsuit was nothing more than an "ill-conceived scheme or artifice" designed to "extort $2 million" from him. Appellant App'x at 9. Kim alleges that the defendants completed false paperwork to pose as the owners of a trademark, licensed the trademark to a third-party, and then sued Kim for violating the licensing agreement. Kim claims that these false legal documents were intended to mislead the district court and therefore were predicate acts of obstruction of justice, mail fraud, and wire fraud that constituted a pattern of racketeering activity. Kim also brought a RICO conspiracy claim, alleging that "the entire scheme or artifice could never have been set in motion without the express agreement, cooperation and coordination of each individual defendant and his assigned role." Appellant App'x at 40.

On September 11, 2015, the defendants filed a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. The defendants argued that Kim had failed adequately to allege a pattern of racketeering activity, as required to state a RICO claim. The defendants raised other arguments supporting their motion to dismiss, based on, inter alia , the doctrines of collateral estoppel and res judicata. Kim subsequently moved to disqualify Kimm as counsel in this litigation and to bar him from participating in any defendant's defense other than his own. Kim also opposed the defendants' motion to dismiss and moved for leave to file a second amended complaint.

By unpublished opinion and order dated August 9, 2016, the district court granted the defendants' motion to dismiss. Appellant App'x at 257–76. The court decided that Kim had failed to state a RICO claim because he had not alleged predicate acts constituting a pattern of racketeering activity. The court found that most of the alleged predicate acts concerned litigation activity in Sik Gaek I —specifically, the preparing, signing, and filing of declarations by Chul Ho Park, Michael Kimm, and Hyung Suk Choi, all of whom are defendants in the instant action—and reasoned that "[w]ell-established precedent and sound public policy preclude such litigation activities from forming the basis for predicate acts under [RICO]." Dist. Ct. Op. at 8, Appellant App'x at 264. The district court noted that Kim's amended complaint also included pre-litigation activities alleged as predicate acts, but found these allegations deficient as a matter of law.

In its August 9, 2016, opinion and order, the district court also denied Kim's motion to disqualify Kimm as counsel, concluding that the motion was rendered moot by the district court's dismissal of Kim's amended complaint. Finally, the district court denied Kim leave to amend his complaint, reasoning that amendment would be futile because the proposed amendments only added additional litigation activities by the defendants which, as such, were insufficient to form the basis for a RICO predicate act.

The defendants then moved for sanctions against Kim, arguing that his lawsuit was meritless and seeking to recover fees expended in defending the Sik Gaek I litigation. The district court denied the motion and in an unpublished opinion and order dated August 12, 2016, concluded that Kim's claims were neither legally nor factually frivolous. The district court reasoned that although it had joined the majority of courts in concluding that litigation activity could not be predicate acts under RICO, at least some courts held differently and sanctions were therefore inappropriate.

Kim timely appealed to this Court from the district court's dismissal of his action and denial of his motions for leave to amend his complaint and to disqualify Kimm. The defendants timely cross-appealed from the district court's denial of their motion for sanctions.

DISCUSSION

I. Failure to State a RICO Claim

The first issue in this appeal is whether the district court erred in granting the defendants' motion to dismiss pursuant to Rule 12(b)(6). Kim challenges the district court's holding that the defendants' alleged litigation activities did not constitute predicate acts for purposes of RICO.¹

"We review de novo a district court's dismissal of a complaint pursuant to Rule 12(b)(6), construing the complaint liberally, accepting all factual allegations in the complaint as true, and drawing all reasonable inferences in the plaintiff's favor." Chambers v. Time Warner, Inc. , 282 F.3d 147, 152 (2d Cir. 2002). To survive a motion to dismiss, a complaint "must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (internal quotation marks omitted) ).

A. RICO

Section 1964(c) of RICO, 18 U.S.C. §§ 1961 – 1968, provides a private right of action to any person injured in its business or property by reason of a violation of the activities prohibited by section 1962. "To establish a RICO claim, a plaintiff must show: (1) a violation of ... 18 U.S.C. § 1692 ; (2) an injury to business or property; and (3) that the injury was caused by the violation of Section 1962." Cruz v. FXDirectDealer, LLC , 720 F.3d 115, 120 (2d Cir. 2013) (quoting DeFalco v. Bernas , 244 F.3d 286, 305 (2d Cir. 2001) ). This appeal implicates the first of these requirements, viz., whether the plaintiff has adequately alleged a violation of section 1962. To establish such a violation, a plaintiff must show "(1) ...