Unigestion Holding v. UPM Tech., Inc.

• Decision Date: 03 February 2016
• Docket Number: Case No. 3:15-cv-00185-SI
• Citation: Unigestion Holding v. UPM Tech., Inc., 160 F.Supp.3d 1214 (D. Or. 2016)
• Parties: Unigestion Holding, S.A., a foreign corporation, d/b/a Digicel Haiti, Plaintiff, v. UPM Technology, Inc. d/b/a UPM Telecom, Inc, and UPM Marketing, Inc., an Oregon corporation; UPM Telecom, Inc., an Oregon a/b/n; UPM Marketing, Inc., an Oregon a/b/n; Benjamin Sanchez a/k/a Benjamin Sanchez Murillo, an Oregon resident; Baltazar Ruiz, an Oregon resident, and Tyler Allen, an Oregon resident, Defendants.
• Court: U.S. District Court — District of Oregon

160 F.Supp.3d 1214

Unigestion Holding, S.A., a foreign corporation, d/b/a Digicel Haiti, Plaintiff,

v.UPM Technology, Inc. d/b/a UPM Telecom, Inc, and UPM Marketing, Inc., an Oregon corporation; UPM Telecom, Inc., an Oregon a/b/n; UPM Marketing, Inc., an Oregon a/b/n; Benjamin Sanchez a/k/a Benjamin Sanchez Murillo, an Oregon resident; Baltazar Ruiz, an Oregon resident, and Tyler Allen, an Oregon resident, Defendants.

Case No. 3:15-cv-00185-SI

United States District Court, D. Oregon.

Signed February 3, 2016

Richard K. Hansen and Anne M. Talcott, SCHWABE WILLIAMSON & WYATT, PC, 1211 SW Fifth Avenue, Suite 1800, Portland, OR 97204; Robert C.L. Vaughan, Cherine Smith Valbrun, and Leah Storie, KIM VAUGHAN LERNER LLP, One Financial Plaza, Suite 2001, Fort Lauderdale, FL 33394. Of Attorneys for Plaintiff.

Kathryn P. Salyer and Eleanor A. DuBay, TOMASI SALYER BAROWAY, 121 SW Morrison Street, Suite 1850, Portland, OR 97204. Of Attorneys for Defendants.

OPINION AND ORDER

Michael H. Simon, District Judge.

Plaintiff Unigestion Holding, S.A., doing business as “Digicel Haiti” (“Digicel”), asserts claims against Defendants, alleging common law fraud, violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”) under 18 U.S.C. §§ 1962(b) –(d), conversion, and unjust enrichment.¹ Defendants move to dismiss Digicel's claims in its Amended Complaint.² Defendants argue that the amended allegations of fraud continue to lack clarity and specificity as to the nature and substance of any alleged misrepresentation. For the reasons that follow, Defendants' motion is denied.

STANDARDS

A. Rules 12(b)(6) and 8(a) of the Federal Rules of Civil Procedure

Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a motion to dismiss for failure to state a claim may be granted only when there is no cognizable legal theory to support the claim or when the complaint lacks sufficient factual allegations to state a facially plausible claim for relief. Shroyer v. New Cingular Wireless Servs., Inc. , 622 F.3d 1035, 1041 (9th Cir.2010). In evaluating the sufficiency of a complaint's factual allegations, the court must accept as true all well-pleaded material facts alleged in the complaint and construe them in the light most favorable to the non-moving party. Wilson v. Hewlett – Packard Co. , 668 F.3d 1136, 1140 (9th Cir.2012) ; Daniels – Hall v. Nat'l Educ. Ass'n , 629 F.3d 992, 998 (9th Cir.2010). To be entitled to a presumption of truth, allegations in a complaint “may not simply recite the elements of a cause of action, but must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively.” Starr v. Baca , 652 F.3d 1202, 1216 (9th Cir.2011). All reasonable inferences from the factual allegations must be drawn in favor of the plaintiff. Newcal Indus. v. Ikon Office Solution , 513 F.3d 1038, 1043 n. 2 (9th Cir.2008). The court need not, however, credit the plaintiff's legal conclusions that are couched as factual allegations. Ashcroft v. Iqbal , 556 U.S. 662, 678–79, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

A complaint must contain sufficient factual allegations to “plausibly suggest an entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the expense of discovery and continued litigation.” Starr , 652 F.3d at 1216. “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 (citing Bell Atl. Corp. v. Twombly , 550 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). “Establishing the plausibility of a complaint's allegations is a two-step process.” Eclectic Props. E., LLC v. Marcus & Millichap Co. , 751 F.3d 990, 995 (9th Cir.2014). At the first step, “a court should ‘identif[y] pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth.’ ” Id. at 996 (quoting Iqbal , 556 U.S. at 679, 129 S.Ct. 1937 ) (alteration in original). At the second step, “a court should ‘assume the[ ] veracity’ of ‘well pleaded factual allegations' and ‘determine whether they plausibly give rise to an entitlement to relief.’ ” Id. (quoting Iqbal , 556 U.S. at 679, 129 S.Ct. 1937 ) (alteration in original).

Additionally, “[w]hen faced with two possible explanations, only one of which can be true and only one of which results in liability, plaintiffs cannot offer allegations that are ‘merely consistent with’ their favored explanation but are also consistent with the alternative explanation.” In re Century Aluminum Co. Sec. Litig. , 729 F.3d 1104, 1108 (9th Cir.2013) (quoting Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 ). Plaintiffs must offer “[s]omething more ... such as facts tending to exclude the possibility that the alternative explanation is true, ... in order to render plaintiffs' allegations plausible within the meaning of Iqbal and Twombly.” Id. A complaint will survive a motion to dismiss where a plaintiff “offer[s] facts that tend[ ] to exclude the defendant's innocuous alternative explanation.” Eclectic Props. , 751 F.3d at 997. Moreover, if two alternative explanations exist, “one advanced by defendant and the other advanced by plaintiff, both of which are plausible, plaintiff's complaint survives a motion to dismiss under Rule 12(b)(6). Plaintiff's complaint may be dismissed only when defendant's plausible alternative explanation is so convincing that plaintiff's explanation is implausible.” Id. (quoting Starr , 652 F.3d at 1216 ).

B. Rule 9(b) of the Federal Rules of Civil Procedure

Plaintiffs alleging fraud or mistake must “state with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). To state a claim under this standard, a plaintiff “must identify the who, what, when, where, and how of the misconduct charged, as well as what is false or misleading about the purportedly fraudulent statement, and why it is false.” Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., Inc. , 637 F.3d 1047, 1055 (9th Cir.2011) (quotation marks and alteration omitted). The plaintiff's allegations must provide “notice of the particular misconduct which is alleged to constitute the fraud charged,” in enough detail to permit the defendant to “defend against the charge and not just deny that [it has] done anything wrong.” Ebeid ex rel. U.S. v. Lungwitz , 616 F.3d 993, 999 (9th Cir.2010) (quotation marks omitted).

Both the plausibility requirement of Rule 8(a) and the particularity requirement of Rule 9(b) apply to allegations of fraud. Cafasso , 637 F.3d at 1055. Allegations of scienter may be pled generally, Fed. R. Civ. P. 9(b), but must still include sufficient factual material to be plausible. Eclectic Props. , 751 F.3d at 995 n.5. The heightened standard of Rule 9(b) also applies to RICO claims alleging predicate acts involving fraud. See, e.g. , Lancaster Cmty. Hosp. v. Antelope Valley Hosp. Dist. , 940 F.2d 397, 405 (9th Cir.1991) (mail fraud); Alan Neuman Prods., Inc. v. Albright , 862 F.2d 1388, 1392–93 (9th Cir.1988) (mail and wire fraud); Best Deals on TV, Inc. v. Naveed , 2007 WL 2825652, at *11 (N.D.Cal. Sept. 26, 2007) (access-device fraud).

BACKGROUND

As alleged in the Amended Complaint (Dkt. 34), Digicel provides mobile telecommunications services to customers in Haiti. Digicel operates telephone switching systems in Miami, Florida, and New York City, New York, that route international calls from third-party providers (such as AT&T and Verizon) to Digicel customers in Haiti. The switching systems use an international gateway that allows Digicel to manage call routing and account for any billing and associated regulatory charges. Under Haitian law, international telephone carriers must charge at least 23 cents per minute for international calls terminating in Haiti. Accordingly, Digicel charges third-party providers at least 23 cents per minute to route international calls to Digicel customers in Haiti.

UPM is an Oregon corporation³ that offers to route international calls to Haiti at lower rates than Digicel. UPM does so by purchasing large quantities of pre-paid Digicel Subscriber Identity Module (“SIM”) cards⁴ in Haiti, shipping the cards to UPM's operations in Oregon, and incorporating the cards into a system connected to the internet. Digicel alleges that UPM sends money by international wire to its agents in Haiti for the purchase of Digicel SIM cards. According to Digicel, shipping documents show that agents shipped Digicel SIM cards from Haiti to Oregon, addressed to Defendant Benjamin Sanchez (“Sanchez”), Owner of UPM Marketing and President of UPM Telecom, and Defendant Tyler Allen (“Allen”), who is also affiliated with UPM. Customer forms also show that Defendant Baltazar Ruiz (“Ruiz”), Project Manager of UPM Telecom, shipped computer equipment to Haiti. Digicel asserts that Ruiz provided laptops, internet routers, and generators to co-conspirators in Haiti to facilitate UPM's operations.⁵

UPM's system includes “SIM Boxes” or “SIM Servers,” located in Oregon, into which SIM cards are loaded. UPM uses the information on the SIM cards to assist in transmitting calls to Haiti in ways that indicate that the calls have originated from Haitian telephone numbers associated with Digicel SIM cards. Accordingly, the Digicel telecommunications system charges local, or non-international, rates for the calls. Digicel refers to UPM's activities as “bypass fraud.” Digicel alleges that UPM engages in two categories of fraudulent activities: non-technological fraud and technological fraud.

A. Non-Technological Fraud

According to Digicel, the non-technological fraud occurs at the point of sale of Digicel's SIM cards. Digicel alleges that UPM sends “agents” to Digicel's authorized retailers in Haiti, including grocery and convenience stores, to purchase SIM cards under the “false premise” that those SIM cards are...