Lopes v. Vieira
| Decision Date | 13 March 2008 |
| Docket Number | No. CV-F-06-1243 OWW/SMS.,CV-F-06-1243 OWW/SMS. |
| Citation | 543 F.Supp.2d 1149 |
| Court | U.S. District Court — Eastern District of California |
| Parties | Manuel LOPES, et al., Plaintiff, v. George VIEIRA, et al., Defendant. |
George M. Lee, Seiler Epstein Ziegler & Applegate LLP, San Francisco, CA, for Plaintiffs.
Blair Morgan White, Law Office Of Blair M. White, San Andreas, CA, Vincent O'Gara, Murphy Pearson Bradley and Feeney, James R. Kirby, Segal & Kirby, San Francisco, CA, for Defendants.
Plaintiffs Manuel and Mariana Lopes dba Lopes Dairy; Raymond Lopes; Joseph Lopes and Michael Lopes, individually and dba Westside Holstein; Alvaro Machado and Tony Estevan have filed a First Amended Complaint ("FAC") pursuant to the Court's Order filed on May 30, 2005 (May 30 Order). Defendants are George and Mary Vieira; California Milk Market, a California Corporation; Valley Gold, LLC, a California limited liability company; Genske, Mulder LLP, a California limited liability partnership; Anthony Cary; Downey Brand LLP, a California limited liability partnership; Central Valley Dairymen, Inc. (CVD), a California Food and Agricultural Nonprofit Cooperative Association; and Does 1-25.1
Defendants Genske, Mulder & Company ("Genske") and. Downey Brand LLP ("Downey") have each filed motions to dismiss pursuant to Rule 12(b)(6), Federal Rules of Civil Procedure, for failure to state a claim against them upon which relief can be granted. In addition, Genske has filed a motion to strike certain allegations of the FAC pursuant to Rule 12(f), Federal Rules of Civil Procedure.
Genske moves pursuant to Rule 12(f), Federal Rules of Civil Procedure, to strike the allegations in Paragraph 41 of the FAC, which names as Defendants Does 1-100, inclusive, and the allegations in Paragraphs 62-68, 70, 80, 82-83, and 85, wherein Does 1-10 and George Vieira are referred to collectively as the "Promoters".
In moving to strike these allegations, Genske argues that Doe allegations are improper in the Ninth Circuit.
Gillespie v. Civiletti 629 F.2d 637, 642 (9th Cir.1980), holds:
As a general rule, the use of `John Doe' to identify a defendant is not favored ... However, situations arise ... where the identity of alleged defendants will not be known prior to the filing of a complaint. In such circumstances, the plaintiff should be given an opportunity through discovery to identify the unknown defendants, unless it is clear that discovery would not uncover the identities, or that the complaint would be dismissed on other grounds.
Genske argues that Civiletti only allows Doe pleading "in limited circumstances: to protect the plaintiffs' privacy [not applicable to this motion]; in civil rights cases where the name of the government agent is not known or readily knowable; and in cases filed by pro per plaintiffs."
Genske cites no authority for such limitations on Doe pleading. While Doe pleading is disfavored, it is not prohibited in federal practice.
Plaintiffs contend that they have named Doe Defendants pursuant to California Code of Civil Procedure § 474 and note that "[t]he purpose of section 474 is to permit the plaintiff to avoid the bar of the statute of limitations." Sobeck & Associates, Inc. v. B & R Investments No. 24, 215 Cal.App.3d 861, 867, 264 Cal.Rptr. 156 (1989). Plaintiffs also cite Rule 15(c)(1), Federal Rules of Civil Procedure:
An amendment of a pleading relates back to the date of the original pleading when
(1) relation back is permitted by the law that provides the statute of limitations applicable to the action ....
Plaintiffs argue that, when a claim is based on state law, the plaintiff must be allowed to include Doe Defendants, "for otherwise the policy of applying state law relation back rules would be thwarted."
Does are alleged in causes of action for violation of federal law as well as in causes of action for violation of state law.
Genske further complains that Plaintiffs have had the benefit of discovery in Nunes v. Central Valley Dairymen, Merced County Superior Court case No. 147653. Genske contends that Plaintiffs know, or should know, the identities of the Doe Defendants.
Because the naming of Doe Defendants is only disfavored, the motion to strike is DENIED. Whether Plaintiffs will be able to substitute individuals for the Doe Defendants will depend on discovery and Rule 15, Federal Rules of Civil Procedure. Whether further amendment to substitute specific individuals for Doe Defendants to invoke relation back in order for purposes of applicable statutes of limitations under either federal or state law remains for further decision.
The FAC alleges that Plaintiffs are owners and operators of dairy farms located in Merced County, California. In the section of the FAC captioned "Summary", Plaintiffs allege:
1. Plaintiffs are all owners and operators of dairy farms located in Merced County, California. Through the machinations of George Vieira and his wife, Mary Vieira, facilitated by the gross negligence and/or participation of accounting, managerial and legal professionals, more than several million dollars worth of milk produced by Plaintiffs' farms was diverted from the proper supply channels into a criminal enterprise headquartered in New Jersey. As a result, Plaintiffs have unnecessarily incurred expenses and other damages, and Plaintiffs have not been paid for the milk that they supplied; rather, proceeds from the sale of their milk and related brokerage fees and commissions have been diverted to the criminal enterprise and to George Vieira and his wife, Mary Vieira, and their company California Milk Market, a California Corporation. George Vieira, Mary Vieira and California Milk Market, in turn, used the diverted proceeds to purchase real estate in at least Stanislaus County, San Joaquin County and Tuolumne County. They have more recently attempted to shelter and hide their ill-gotten proceeds by transferring parcels of real estate to third parties, either acting as nominees or without payment of fair value.
2. The criminal enterprise that George Vieira, Mary Vieira and California Milk Market conspired with and used to divert milk payments from plaintiffs to themselves consisted of an affiliation of cheese manufacturers, bulk buyers of cheese products, and milk product brokers, together with the officers and owners who ran these businesses.
3. The criminal enterprise centered upon a publicly traded company called Suprema Specialties, Inc., and a concerted scheme to inflate the size, profitability, growth and inventory value of Suprema Specialties, Inc. Indeed, from 1996 to 2002, Suprema Specialties, Inc. reported annual double-digit growth in sales and revenues, and it used that reported growth to raise more than $150 million from two public stock offerings and from bank loans. These funds were then largely diverted to individual members of the criminal enterprise.
4. Suprema Specialties, Inc. created the appearance of rapid and steady growth by using fictitious invoices and fictitious purchase orders, in a scheme that the Securities and Exchange Commission dubbed "Round-Tripping." Under the Round-Tripping arrangements, Suprema Specialties, Inc. would pretend to purchase milk and milk products from milk product brokers, ostensibly to manufacture into cheese. Suprema Specialties, Inc. would then issue checks to pay for these orders, but no product was physically shipped. Instead, the milk product brokers and bulk cheese buyers who participated in the criminal enterprise would turn around and pretend to order manufactured cheese products from Suprema Specialties, Inc., which Suprema Specialties, Inc. would report on its books to inflate its sales and accounts receivable. The milk product brokers and bulk cheese consumers would then use the payments that were sent to them from Suprema Specialties, Inc., after deducting commission payments for themselves, to make payments on the fictitious orders, so that Suprema Specialties, Inc. could show regular payments on its fictitious accounts receivable and keep the receivables current — a condition required for Suprema Specialties, Inc.'s large bank loans.
5. In 2001, Suprema Specialties, Inc. reported $420 million in revenues; a substantial portion of those revenues was fictitious. The Securities and Exchange Commission's investigation found that from 1998 to February of 2002, at least $135 million of Suprema Specialties, Inc.'s reported revenue was fictitious.
6. In order to maintain the pretense of growth and profitability, Suprema Specialties, Inc. manufactured cheese and cheese products and it maintained warehouses of inventory. But the actual inventory based upon the actual volume of cheese that Suprema Specialties, Inc. manufactured was too small in relation to its reported volume of sales, and Suprema Specialties, Inc. accordingly cut the cheese with starch fillers and affixed false labels to the inventory, thus fraudulently inflating both the size and the value of the inventory.
7. Additionally, to mask its fraudulent activities, Suprema Specialties, Inc. used the same milk product brokers for its legitimate purchases of milk as it used for its fictitious purchases. This practice and other steps taken by the criminal enterprise, directly led to plaintiffs' catastrophic loss. The loss primarily falls into four categories.
8. Defendant George Vieira was retained by and controlled the day-to-day operations of and business planning for Central Valley Dairymen, an agricultural cooperative through which pl...
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