Lopez v. Council On American-Islamic Relation

Decision Date28 September 2009
Docket NumberCivil Action No. 08-1989 (RMU).
Citation657 F.Supp.2d 104
PartiesRene Arturo LOPEZ et al., Plaintiffs, v. COUNCIL ON AMERICAN-ISLAMIC RELATIONS ACTION NETWORK, INC. et al., Defendants.
CourtU.S. District Court — District of Columbia

David Yerushalmi, Chandler, AZ, for Plaintiffs.

Martin F. McMahon, Adam Shartzer Caldwell, Amber L. Husbands, Davis Wright Tremaine, LLP, Washington, DC, for Defendants.

MEMORANDUM OPINION

RICARDO M. URBINA, District Judge.

GRANTING THE PLAINTIFFS' MOTION TO FILE A SUR-REPLY; GRANTING THE CAIR DEFENDANTS' MOTION TO DISMISS; GRANTING DEFENDANT GORAYA'S MOTION TO DISMISS
I. INTRODUCTION

This matter is before the court on the defendants' motion to dismiss the plaintiffs' complaint. The plaintiffs brought this action against the Council on American-Islamic Relations Action Network, Inc. ("CAIR"); Zahara Investment Corporation ("Zahara"); Greater Washington LLC of Delaware ("GW LLC"); Khalid Iqbal, the Managing Director of CAIR Maryland/Virginia ("CAIR MD/VA"); Ibrahim Hooper, CAIR's Director of Communications; Amina Rubin, CAIR's Coordinator of Communications; Nihad Awad, CAIR's Executive Director and an authorized signatory of GW LLC; Parvez Ahmed, CAIR's Chairman of the Board; Khadijah Athman, the Manager of the Civil Rights Division at CAIR; Nadhira Al-Khalili, CAIR's in-house legal counsel;1 Tahra Goraya, CAIR's National Director; and Morris Days, the Resident Attorney of CAIR MD/VA. The plaintiffs allege that the defendants conspired to violate the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(d), violated the D.C. Consumer Protection Procedures Act ("DCCPPA"), D.C.Code § 28-3901 et seq., and violated the Virginia Consumer Protection Act ("VCPA"), Va. Code Ann. § 59.1-196 et seq. The plaintiffs also allege claims of common law fraud and aiding and abetting fraud, breach of fiduciary duty, intentional infliction of emotional distress, conversion and unjust enrichment. Because the court concludes that the plaintiffs do not have standing to bring a RICO claim, the court dismisses that claim with prejudice. The court accordingly dismisses the seven other state law claims without prejudice for want of jurisdiction.

II. BACKGROUND
A. Factual History2

CAIR operates as a public interest law firm with various regional and local offices around the country. Compl. ¶ 21. In or around December 2004, CAIR opened CAIR MD/VA, its local office in based Herndon, Virginia. Id. ¶ 2. In or around June 2006, CAIR MD/VA hired Days as its Resident Attorney and Manager of its Civil Rights Department. Id. Days's job was to provide legal representation to Muslims alleging of civil rights abuses. Id. Days, however, had never been to law school and was not licensed to practice law. Id. ¶ 25. The plaintiffs allege that Days, with the intent to defraud CAIR clients, represented that he was a competent attorney and charged over thirty clients for legal services despite the fact that he was not a lawyer and did not perform any legal services. Id. ¶¶ 25-27, 35.

By November 2007, Iqbal, the managing director of CAIR MD/VA, had allegedly learned that Days was collecting legal fees in violation of CAIR's policy of representing its clients pro bono. Id. ¶ 32. CAIR MD/VA had received numerous complaints about Days's handling of CAIR clients' legal matters and terminated Days's employment on February 10, 2008. Id. ¶¶ 34-35.

On or about February 8, 2008, Iqbal called and/or e-mailed Ahmed, Awad, Goraya and other unnamed officials at CAIR informing them about Days's actions. Id. ¶¶ 37, 82. Soon thereafter, Ahmed, Awad, Goraya and other unnamed officials of CAIR informed Athman and Khalili of Days's actions. Id.

In or around February 2008, Iqbal, Ahmed, Awad, Goraya, Athman and Khalili allegedly decided to take affirmative steps to conceal the scheme from the victims. Id. ¶ 38. These defendants allegedly agreed to inform the victims of the scheme only that Days was no longer at CAIR MD/VA and that any complainants must speak to Days directly to address their concerns. Id. ¶ 39. Over time, as complaints mounted, the defendants purportedly agreed that they would provide partial restitution to the most vocal victims. Id. ¶ 41. They also allegedly agreed that they would not disclose the fraud to any law enforcement or other government agency. Id.

Before any restitution was paid, the defendants required that every person receiving restitution sign a document entitled "Voluntary Agreement and Release of Claims." Id. ¶ 42. The document absolved CAIR of any civil liability arising out of its prior or future representation of former or current clients, and stipulated to a $25,000 penalty for any person who disclosed the events involving the scheme. Id. ¶¶ 42, 45, 48.

In response to a widely published report on the scheme, defendants Iqbal, Awad, Goraya, Athman, Khalili, Hooper and Rubin ("RICO Defendants")3 published a press release on the CAIR website. Id. ¶ 106. The press release stated that Days was terminated immediately after the scheme was discovered and that the CAIR MD/VA offices reached out to defrauded CAIR clients by offering them compensation and referring them to outside attorneys. Id. ¶ 107.

B. Procedural History

The plaintiffs filed a complaint on November 11, 2008, alleging conspiracy to violate RICO, violation of the DCCPPA, violation of the VCPA, common law fraud and aiding and abetting fraud, breach of fiduciary duty, intentional infliction of emotional distress, conversion and unjust enrichment. See generally Compl. The CAIR Defendants filed a motion to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) on January 15, 2009, see generally Defs.' Mot. The plaintiffs filed an opposition on February 1, 2009, see generally Pls.' Opp'n, to which the defendant replied to on February 18, 2009, see generally Defs.' Reply. The plaintiffs filed a motion seeking leave to file a sur-reply on February 25, 2009, see generally Pls.' Mot. to File a Sur-Reply, which the defendants opposed on March 11, 2009, see generally Defs.' Opp'n to Pls.' Mot. to File a Sur-Reply. On June 25, 2009, defendant Goraya filed a motion to dismiss, joining in the arguments made by the CAIR Defendants in their motion. Def. Goraya's Mot. to Dismiss at 1. The plaintiffs, likewise, incorporated by reference their opposition to the CAIR Defendants' motion in opposition to defendant Goraya's motion. Pls.' Opp'n to Def. Goraya's Mot. to Dismiss at 1. The court now turns to the parties' arguments.

III. ANALYSIS
A. The Court Grants the Plaintiffs' Motion to File a Sur-Reply

The plaintiffs argue that they should be granted leave to file a sur-reply because, in their reply, the defendants brought up the novel legal argument that co-conspirators in a cover-up cannot be liable for damages arising from the underlying crime. Pls.' Mot. to File Sur-Reply at 2. The defendants counter that the plaintiffs' sur-reply raises legal issues not previously addressed and therefore the motion to file a sur-reply should be denied. Defs.' Opp'n to Pls.' Mot. to File Sur-Reply at 2.

It is within the court's authority to grant leave to file a sur-reply when "the party making the motion would be unable to contest matters presented to the court for the first time in the opposing party's reply." Lewis v. Rumsfeld, 154 F.Supp.2d 56, 61 (D.D.C.2001). The court may permit the filing of a sur-reply at its discretion. Am. Forest & Paper Ass'n v. Envtl. Prot. Agency, 1996 WL 509601, at *3 (D.D.C. Sept. 4, 1996). Because the plaintiffs' sur-reply is "helpful to the adjudication" of the motion to dismiss and because it is not "unduly prejudicial to the defendants," the court grants the plaintiffs' motion to file a sur-reply. Id. The court further notes that it will not consider matters raised for the first time in the plaintiffs' sur-reply. See Tnaib v. Document Tech., LLC, 450 F.Supp.2d 87, 89 n. 3 (D.D.C.2006) (observing that it is inappropriate to raise new substantive issues in a sur-reply).

B. The Court Grants the Defendants' Motions to Dismiss the Plaintiffs' RICO Claim
1. Legal Standard for a Motion to Dismiss Pursuant to Rule 12(b)(1)4

Federal courts are courts of limited jurisdiction and the law presumes that "a cause lies outside this limited jurisdiction." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994); St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-89, 58 S.Ct. 586, 82 L.Ed. 845 (1938); see also Gen. Motors Corp. v. Envtl. Prot. Agency, 363 F.3d 442, 448 (D.C.Cir.2004) (noting that "[a]s a court of limited jurisdiction, we begin, and end, with an examination of our jurisdiction").

Because "subject-matter jurisdiction is an `Art[icle] III as well as a statutory requirement[,] no action of the parties can confer subject-matter jurisdiction upon a federal court.'" Akinseye v. District of Columbia, 339 F.3d 970, 971 (D.C.Cir. 2003) (quoting Ins. Corp. of Ir., Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982)). On a motion to dismiss for lack of subject matter jurisdiction pursuant to Rule 12(b)(1), the plaintiff bears the burden of establishing by a preponderance of the evidence that the court has subject matter jurisdiction. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992).

Because subject matter jurisdiction focuses on the court's power to hear the claim, however, the court must give the plaintiff's factual allegations closer scrutiny when resolving a Rule 12(b)(1) motion than would be required for a Rule 12(b)(6) motion for failure to state a claim. Macharia v. United States, 334 F.3d 61, 64, 69 (D.C.Cir.2003); Grand Lodge of Fraternal Order of Police v. Ashcroft, 185 F.Supp.2d 9, 13 (D.D.C.2001). Thus, the court is not limited to the allegations contained in the complaint. Hohri v. United States, 782 F.2d...

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