Holmes High Rustler, LLC v. Marco
| Decision Date | 18 December 2015 |
| Docket Number | Case No. 15-cv-02086-JSC |
| Court | U.S. District Court — Northern District of California |
| Parties | HOLMES HIGH RUSTLER, LLC, Plaintiff, v. MARCO A GOMEZ, Defendant. |
Plaintiff Holmes High Rustler, LLC ("Plaintiff"), owner of property at 127 Precita Avenue, San Francisco, brings this action against Defendant Marco A. Gomez ("Defendant"), the tenant and lessee of one of the units at that property. Plaintiff alleges that since 2012 Defendant has been subletting rooms in his unit to undocumented immigrants, charging them more than both his written lease and local regulations allow, and in exchange, unlawfully hiding the subtenants' identities from Plaintiff and the authorities. (See Dkt. No. 27.)1 Plaintiff contends that Defendant's conduct constitutes a pattern of racketeering activity in violation of the civil Racketeer Influenced and Corrupt Organizations ("RICO") Act, 18 U.S.C. § 1962. Now pending before the Court is Defendant's motion to dismiss the Second Amended Complaint ("SAC"). (Dkt. No. 28.) Having carefully considered the parties' submissions, and having had the benefit of oral argument on December 10, 2015, the Court GRANTS Defendant's motion.
Plaintiff owns two apartment buildings on a single parcel of property, including onelocated at 127 Precita Avenue, San Francisco, California. (Dkt. No. 27 ¶ 3.) Defendant has resided in one of the apartment building's units ("the Premises") since 1983. (Id.) Plaintiff purchased the buildings in a bank sale on December 31, 2013. (Id.) For the last few years, Defendant has leased the Premises for a monthly rent of $1,117.32. (Id. ¶¶ 6-7.) In connection with the sale of the buildings to Plaintiff, Defendant averred in writing that he had a written lease, though he has not shown a copy of the lease to Plaintiff. (Id.) Incorporated into Plaintiff's lease are, among others provisions, two rent control regulations, including (1) San Francisco Rent Board Ordinance Section 37.3(c), which prohibits a tenant from charging subtenants more in rent than the tenant himself currently owes the landlord, S.F. Admin. Code § 37.3(c),2 and (2) the Residential Rent Stabilization and Arbitration Board Rules and Regulations § 6.15C(3),3 which prohibits any subrental of less than the entire unit for an amount in excess of the subtenant's proportional share of the rent payable to the landlord thereof. (Dkt. No. 27 ¶ 7.) Plaintiff has been violating these rent control regulations since February 1, 2012, by subleasing bedrooms for substantially more than the amount he owes pursuant to his lease "all the while pocketing the rent illegally charged to his subtenants." (Id. ¶ 8.) Thus, Defendant reaps a benefit by "goug[ing]" the subtenants who pay him rent. (Id.)
Plaintiff has chosen undocumented immigrants as his sublessees because "they were unlikely to file complaints challenging [Defendant's] illegal activities." (Id.) The subletting practice is part of a scheme whereby Defendant promised to provide shelter and to withhold the identities of the undocumented immigrants from both the landlord and all investigating authorities in exchange for high subtenant rent payments. (Id.) Plaintiff has taken deliberate steps to conceal his wrongdoing, thus, the dates and times of violations are not known to Plaintiff. (Id. ¶ 19.)
At the time of the buildings' sale to Plaintiff, Defendant submitted to the prior owner a written tenant questionnaire that deceptively withheld information about the "enterprise." (Id.¶ 18.) Because Plaintiff was unaware of the scheme at the time of purchase, Plaintiff paid a higher price for the property than it would have had it known about the information. (Id.) Plaintiff alleges that the value of the property has been further reduced due to Defendant's conduct. (Id. ¶ 18.)
Plaintiff filed this action on May 7, 2015. (Dkt. No. 1.) The Court dismissed the First Amended Complaint ("FAC"), which contained two causes of action. The first, a RICO claim, alleged that Defendant and his undocumented subtenants are engaged in a racketeering enterprise premised on predicate acts of mail fraud, in violation of 18 U.S.C. § 1341, and violation of Section 274 of the Immigration and Nationality Act, 8 U.S.C. § 1324. (Dkt. No. 12 ¶¶ 12-16.) As a remedy for that RICO violation, Plaintiff sought a declaration that Defendant's misuse of the Premises is a material violation of his lease. (Id. ¶ 19.) The FAC's second cause of action was for declaratory relief, seeking an order that due to the material breach of Defendant's lease, the lease must be terminated and Plaintiff is entitled to full possession of the Premises. (Id. ¶ 20.) The Court dismissed the RICO claim, concluding that Plaintiff failed to sufficiently plead causation or a viable remedy inasmuch as only money damages, not declaratory or injunctive relief, is available for a private civil RICO claim. Holmes High Rustler, LLC v. Gomez, No. 15-cv-02086-JSC, 2015 WL 4999737, at *3 (N.D. Cal. Aug. 21, 2015). For the latter reason, the Court also dismissed the second cause of action for declaratory relief. Id. at *7.
The SAC now contains a single claim for relief under RICO. Plaintiff alleges, as before, that Defendant and the illegal subtenants—all undocumented immigrants—constituted an enterprise. (Dkt. No. 27 ¶¶ 8, 15.) Plaintiff contends that the enterprise is structured to defraud Plaintiff, as landlord, as well as government authorities, and that the conduct violates Section 274 of the Immigration and Nationality Act, 8 U.S.C. § 1324, and the submission of monthly rent payment via mail constitutes mail fraud in violation of 18 U.S.C. § 1341, both of which are predicate acts for RICO purposes. (Id. ¶ 9.) Specifically, Plaintiff alleges that Defendant "and the various and as yet unidentified illegal immigrants who sublease space in the Premises from [Defendant] [are] part of a collective agreement to violate [local rent rules] in exchange for[Defendant's] silence on any violations of immigration laws." (Id. ¶ 8.) Plaintiff alleges that these activities amount to a common course of conduct that have proximately caused injury to Plaintiff's property by "adversely affect[ing] the stigma of the Property and Plaintiff's ability to achieve reasonable rents for the Premises." (Id. ¶ 17.) Plaintiff seeks an unidentified amount of money as damages for the RICO violation. (Id. at 6.)
To survive a Rule 12(b)(6) challenge a complaint must allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A facial plausibility standard is not a "probability requirement" but mandates "more than a sheer possibility that a defendant has acted unlawfully." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks and citations omitted). For purposes of ruling on a Rule 12(b)(6) motion, the court "accept[s] factual allegations in the complaint as true and construe[s] the pleadings in the light most favorable to the non-moving party." Manzarek v. St. Paul Fire & Mar. Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). "[D]ismissal may be based on either a lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." Johnson v. Riverside Healthcare Sys., 534 F.3d 1116, 1121 (9th Cir. 2008) (internal quotation marks and citations omitted); see also Neitzke v. Williams, 490 U.S. 319, 326 (1989) ().
Even under the liberal pleading standard of Federal Rule of Civil Procedure 8(a)(2), under which a party is only required to make "a short and plain statement of the claim showing that the pleader is entitled to relief," a "pleading that offers 'labels and conclusions' or 'a formulaic recitation of the elements of a cause of action will not do.'" Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555). "[C]onclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss." Adams v. Johnson, 355 F.3d 1179, 1183 (9th Cir. 2004); see also Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011) (). The court must be able to "draw the reasonable inference that thedefendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 663. "Determining whether a complaint states a plausible claim for relief . . . [is] a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 663-64.
The civil RICO Act 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 unlawful debt." 18 U.S.C. § 1962(c). To state a civil RICO claim, a plaintiff must allege facts showing: "(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity (known as predicate acts) (5) causing injury to plaintiff's business or property." Living Designs, Inc. v. E.I. Dupont de Nemours & Co., 431 F.3d 353, 361 (9th Cir. 2005) (internal quotation marks and citation omitted). Defendant contends that the SAC fails to allege facts sufficient to plausibly establish the existence of an enterprise, sufficient predicate acts, or injuries proximately caused by the enterprise's conduct. The Court concludes that Plaintiff still fails to plead a RICO injury proximately caused by an actionable predicate act and therefore fails to state a...
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