Burger v. Kuimelis

Decision Date28 June 2004
Docket NumberNo. C-02-2309-VRW.,C-02-2309-VRW.
Citation325 F.Supp.2d 1026
PartiesEugene BURGER et al, Plaintiffs, v. Michael KUIMELIS et al, Defendants. Michael Kuimelis et al, Counterclaimants, v. Eugene Burger et al, Counterdefendants.
CourtU.S. District Court — Northern District of California

Marcus S. Topel, Daniel F. Cook, Topel & Goodman, San Francisco, CA, Daniel B. Beck, Beck Law Offices, Santa Rosa, CA, for Plaintiffs and Cross-Defendants.

Matthew Brian Pavone, Novato, CA, Lawrence Bernheim, Bernheim & Hicks, Santa Rosa, CA, Frank Scott Moore, Law Offices of Frank S. Moore, APC, Debra Spotts Blum, Bernard Gehlhar, Beth A. Fruechtenicht, Wilson Elser Moskowitz Edelman & Dicker LLP, James D. Boughey, Wilson Elsner Moskow et al, Michele M. Betti, Sedgwick, Detert, Moran & Arnold LLP, Gary A. Bresee, Barger & Wolen LLP, Cheryl Dyer Berg, Jennifer A. Bunshoft, Paul E.B. Glad, Sonnenschein Nath & Rosendthal, Mary McNamara, Swanson & McNamara LLP, San Francisco, CA, for Defendants and Cross-Claimants.


WALKER, District Judge.


The basic facts of this case are simple, although disputed. Counterdefendants were involved in purchasing insurance and insurance brokerage services from counterclaimants on behalf of a number of projects. Counterdefendants claim that they were secretly overcharged. Counterclaimants have a different story, namely that counterdefendants agreed to the extra charges and that counterdefendants used the extra charges to defraud HUD and the project owners.

As noted on a number of occasions, from these simple facts has grown a briar patch of litigation. Recently, the court considered a number of motions related to the fifth amended complaint. In this order, the court considers the motions filed by counterdefendants against the fifth amended counterclaim ("FACC"). FACC (Doc # 229, Exh 1).

Counterclaimants plead the following twelve causes of action in the FACC:

1. Violation of section 1962(c) of the Racketeer Influenced and Corrupt Organizations ("RICO") Act against all counterdefendants.

2. Violation of RICO § 1962(d) for conspiracy to violate RICO § 1962(c) against all counterdefendants.

3. Violation of RICO § 1962(d) for conspiracy to violate RICO § 1962(a) against all counterdefendants.

4. Breach of contract against Eugene Burger Management Corporation, California; Eugene Burger Management Corporation, Nevada; and Eugene Burger Management Corporation, Texas (collectively, "EBMC"), as well as Eugene Burger.

5. Fraud against Burger and EBMC.

6. Unfair trade practices under Cal Bus & Prof Code § 17000 against Burger and EBMC.

7. Unfair competition under Cal Bus & Prof Code § 17200 against Burger and EBMC.

8. Negligence against Burger and EBMC.

9. Declaratory relief and equitable indemnity against all counterdefendants.

10. Implied contractual indemnity against Burger and EBMC.

11. Money had and received against Burger and EBMC.

12. Accounting against all counterdefendants.

Counterdefendants filed three separate motions against the FACC. The first motion is directed to claims one through three and five, the second motion is directed to claims four and six through twelve and the third motion is directed to the FACC as a whole. See Doc. 238, 239 & 244. As noted by Kuimelis, counterdefendants' strategy of dividing its arguments in three motions appears to be an attempt to evade the Civil Local Rules.

Under Civ LR 7-2(b), motions are to consist of "one filed document not to exceed 25 pages in length." Counterdefendants filed three separate "motions" within one day of each other instead of "one filed document" as required by the Civil Local Rules. Although none of the documents exceeds twenty-five pages individually, counterdefendants' three motions added together total fifty-eight pages, a sum more than double the allowed page limit. Indeed, counterdefendants grouped their arguments against the first through third and fifth claims in one motion and their arguments against the fourth and sixth through twelfth claims in another motion. This odd grouping suggests the intent to evade the Civil Local Rules.

This type of rule-bending motion practice is unacceptable. The court regularly grants parties' requests to file an over-sized memorandum under Civ LR 7-4 and 7-10. But parties are not permitted unilaterally to impose on the nonmoving parties and the court the burden of sifting through excessively long moving papers. The page limit forces moving parties to focus their discussion on the most important issues. In this case, counterdefendants could have substantially focused their arguments; indeed, counterdefendants were required to withdraw arguments in their reply because counterdefendants had not sufficiently researched the law underlying their arguments before filing their motions.

The court declines, at this time, to refuse to consider counterdefendants' motions or otherwise impose sanctions, but counterdefendants are cautioned not to engage in these types of practices again.


The court first considers counterdefendants' motions directed to the FACC as a whole.

Counterdefendants move the court to dismiss the FACC pursuant to the court's authority under FRCP 11 to dismiss a pleading as "`false and sham.'" See Bradley v. Chiron Corp., 136 F.3d 1317, 1324 (Fed.Cir.1998) (quoting Ellingson v. Burlington Northern, Inc., 653 F.2d 1327, 1329 (9th Cir.1981)); Counterdefendants Mot (Doc # 244). Rule 11 prohibits, inter alia, allegations that are not "likely to have evidentiary support." Examples of cases in which pleadings were dismissed as false and sham include Ellingson and Bradley. In Ellingson, the Ninth Circuit affirmed the dismissal of a pleading because the "[e]ssential allegations of the complaint were false." 653 F.2d at 1329-30. In Bradley, the Federal Circuit affirmed the dismissal of an amended pleading that so contradicted the original pleading it was "a transparent attempt to conform the facts to the requirements of the cause of action." Id. at 1324.

Both parties request judicial notice of a number of documents related to the motion to dismiss a pleading as a sham. See Doc. 243, 260. The court may examine evidence outside the pleadings in considering a motion to dismiss a pleading as a sham. Ellingson, 653 F.2d at 1329-30. Accordingly, it appears unnecessary to take judicial notice of the documents; rather, the court may consider the documents as it considers evidence submitted in support of a motion for summary judgment.

Counterdefendants argue that the allegations in the FACC so contradict previous allegations and statements made by Kuimelis that the FACC should be dismissed in its entirety. Counterdefendants cite allegations related to (1) the repayment of a debt and (2) the location at which oral contracts were made.


In the FACC, counterclaimants allege that the parties entered into a service fee agreement beginning in 1991. FACC (Doc # 229, Exh 1) at ¶ 51. The service fees included payment for work performed by Kuimelis "beyond the transacting of insurance," as well as payments on a debt owed by counterdefendants to counterclaimants. Id. In early 1995, having lost track of the amount due under the debt, the parties discontinued service fees as payment on the debt but continued the service fees as payment for extra, non-transactional work. Id at ¶ 59.

On a number of occasions while describing the basis for the alleged service fees, Kuimelis failed to mention that the service fees were used to make payments on a debt. Such occasions include prior complaints and prior testimony in Burger's criminal trial. See, e.g., Cross-complaint (Doc # 240, Exh 1) at ¶ 12; Kuimelis Testimony, Feb 15, 2001, United States v. Burger, CR 99-0439 SI (Doc # 248, Exh 8) at 23:13-22. Additionally, during an interview with the FBI, Kuimelis stated that, in 1994, Kuimelis "agreed to release him [Burger] from the debt because the Burger account was a large account for him." FBI 302 Interview, Michael Kuimelis, Feb 22, 2000 (Doc # 248, Exh 9) at 2.

Counterdefendants contend that Kuimelis' statement to the FBI directly contradicts the allegations in the FACC. The court, however, sees no material difference between the facts alleged in the complaint and the statement made to the FBI. In the FACC, counterclaimants allege:

In or about early 1995, EBMC, by and through Eugene Burger, proposed that rather than resolving the specific question of how much principal and interest remained due on the $322,309 debt owed by EBMC to MBK, the parties agree [sic] that MBK would continue to charge service fees, in addition to insurance premiums, and that a percentage of the service fees would be held by MBK for the benefit of Burger and dispersed to EBMC at Burger's direction.

FACC (Doc # 229, Exh 1) at ¶ 59.

The general statements in the FACC describing the discontinuance of service fees as debt repayments are nearly identical to the general reference in the FBI statement to a "release" from the debt. Nor is the difference between "early 1995" as stated in the FACC and "1994" as stated in the FBI statement material.

Counterdefendants contend, in the alternative, that Kuimelis suggested by negative implication that the service fees included only non-transactional services. In Bradley, the plaintiff alleged in the original complaint that he had not talked with his attorney about an agreement. After the complaint was dismissed without prejudice, the plaintiff alleged that he relied on his attorney's advice in relation to the agreement. The Bradley court, therefore, relied on a direct contradiction between the pleadings in dismissing the complaint as a sham.

In this case, counterdefendants ask the court to conclude, as a matter of law, that Kuimelis implied that the service fees were limited to fees for services beyond the transacting of insurance. The weak inference counterdefendants advance, however, is simply not enough to dismiss a pleading as a sham...

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