165 Reply Re Motion For Reconsideration - Local 501

Case 2:12-cv-09324-DDP-VBK Document 165 Filed 11/04/13 Page 1 of 21 Page ID #:2856
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J. Mark Moore, State Bar No. 180473 jmm@mllawyers.net H. Scott Leviant, State Bar No. 200834 hsl@mllawyers.net MOORE & LEVIANT LLP 20700 Ventura Blvd., Suite 140 Woodland Hills, CA 91364 Telephone: (877) 360-7020 Facsimile: (310) 870-7020 Attorneys for Plaintiffs
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA FINN PETTE, et al., Plaintiffs, vs. INTERNATIONAL UNION OF OPERATING ENGINEERS, a trade union, et al., Defendants. Case No.: 2:12-cv-09324-DDP-VBK CLASS ACTION PLAINTIFFS COMBINED REPLY MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR RECONSIDERATION OF PORTIONS OF THE COURTS OCTOBER 9, 2013 ORDER GRANTING MOTIONS TO DISMISS Date: Time: Location: November 18, 2013 10:00 a.m. Courtroom 3 312 N. Spring Street Los Angeles, CA 90012
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TABLE OF CONTENTS INTRODUCTION ..........................................................................................1 A. Defendants Claims That Plaintiff Cannot Support Reconsideration of the Wholesale Dismissal of the RICO Claims under Rule 7-18(c) Are Erroneous ................................................................................................... 3 1. Plaintiffs Motion is Not Procedurally Improper, As Defendants Contend ............................................................................................... 3 The Court Should Reject Defendants Procedurally Flawed Argument That It Would be Futile to Reconsider the Standing Ruling ................................................................................................. 7 Defendants Third Argument that the EPEC Allegations Do Not Support a Plausible RICO Claim Was Not Previously Accepted and Should Not Be Now. .................................................................. 10 B. The Court Should Likewise Reject Defendants Argument Regarding the Dismissal of the Aiding and Abetting Claim ..................................... 15 III. THE ABM DEFENDANTS FAIR NOTICE ARGUMENT IS NOT A BASIS TO DENY PLAINTIFFS MOTION ................................................17 IV. CONCLUSION .............................................................................................18
II. THE IUOE DEFENDANTS ARGUMENTS ARE MERITLESS .................3
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TABLE OF AUTHORITIES FEDERAL DECISIONAL AUTHORITY Barker v. Riverside Cnty. Office of Educ., 584 F.3d 821 (9th Cir. 2009) ................. 8 Cervantes v. City of San Diego, 5 F.3d 1273 (9th Cir. 1993) ................................... 8 Gutierrez v. Johnson & Johnson, 743 F. Supp. 2d 418 (D.N.J. 2010) ................... 11 Huynh v. Chase Manhattan Bank, 465 F.3d 992 (9th Cir.2006) .............................. 8 In re MasterCard Int'l Inc., Internet Gambling Litig., 132 F. Supp. 2d 468 (E.D. La. 2001) aff'd sub nom. In re MasterCard Int'l Inc., 313 F.3d 257 (5th Cir. 2002) . 15 Jablon v. Dean Witter & Co., 614 F.2d 677 (9th Cir. 1980) .................................. 10 Peloza v. Capistrano Unified School Dist., 37 F.3d 517 (9th Cir. 1994) ................. 7 Pretroysan v. AMCO Ins. Co., No. CV 12-06876 SJO (CWx), 2013 WL 3989234 (C.D. Cal. Aug. 2, 2013) ....................................................................................... 6 Rae v. Union Bank, 725 F.2d 478 (9th Cir.1984) ................................................... 15 Rescuecom Corp. v. Google Inc., 562 F.3d 123 (2nd Cir. 2009) .............................. 5 River City Markets, Inc. v. Fleming Foods W., Inc., 960 F.2d 1458 (9th Cir. 1992) ............................................................................................................................ 14 Rubert-Torres v. Hospital San Pablo, Inc., 205 F.3d 472 (1st Cir. 2000) .............. 10 Union Pac. R.R. v. Coast Packing Co., 236 F.Supp.2d 1130 (C.D. Cal. 2002) ........ 6 Von Saher v. Norton Simon Museum of Art at Pasadena, 592 F.3d 954 (9th Cir. 2010) ..................................................................................................................... 8
Local Rule 7-18(c) .......................................................................................... passim
Page ii PLAINTIFFS COMBINED REPLY IN SUPPORT OF MOTION FOR RECONSIDERATION OF PORTIONS OF THE COURTS OCTOBER 9, 2013 ORDER GRANTING MOTIONS TO DISMISS
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MEMORANDUM OF POINTS AND AUTHORITIES INTRODUCTION The arguments presented by the IUOE Defendants (and the ABM Defendants in their very short separate opposition) as grounds for denying Plaintiffs wellfounded Motion for Reconsideration (Motion) fail to demonstrate that reconsideration is not warranted. The IUOE Defendants brief is particularly striking because of what those defendants (and the other defendants that have joined in their opposition) do not and cannot contest: As to the dismissal of the aiding and abetting claim: The IUOE Defendants do not and cannot dispute that the Court relied solely on federal law in dismissing the aiding and abetting claim with prejudice; The IUOE Defendants do not and cannot dispute that state law claims for breach of fiduciary duty and UCL violations can support aiding and abetting liability under California law, as shown by the authorities cited in Plaintiffs Motion; The IUOE Defendants do not and cannot dispute that the Second Amended Complaint (SAC) contained a claim, whether or not it was deficiently pled, for common law breach of fiduciary duty; in fact Defendants recognized as much in their Motion to Dismiss; The IUOE Defendants do not and cannot dispute that the now-filed Third Amended Complaint (TAC) contains an amended, more detailed common law breach of fiduciary duty claim, which, absent the Courts dismissal of the aiding and abetting claim with prejudice, could support aiding and abetting liability under California law; The IUOE Defendants do not and cannot dispute that Plaintiffs at the hearing on the motions to dismiss sought leave to amend their UCL claim
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to state a more expansive claim against additional defendants, and the Court, in its order, gave Plaintiffs leave to plead such a claim; The IUOE Defendants do not and cannot dispute that the TAC now contains a more expansive claim for UCL violations, including violations by the IUOE Defendants; The IUOE Defendants do not and cannot dispute that aiding and abetting liability is not barred as a matter of law as to violations of the UCL; As to the dismissal of the RICO claims: The IUOE Defendants do not and cannot dispute that in the SAC Plaintiffs alleged that certain Plaintiffs made EPEC contributions and that the Court was required to consider those material facts in ruling on the Motion to Dismiss; The IUOE Defendants do not and cannot dispute that Plaintiffs pointed to their allegations of EPEC contributions in opposing the IUOE Defendants Motion to Dismiss; The IUOE Defendants do not and cannot dispute that, in its analysis of RICO standing, the Court did not consider the allegations regarding EPEC contributions, but rather analyzed solely the alleged injuries to Local 501 and the affiliated trusts. Instead of simply acknowledging that the Court overlooked material facts (namely, the state law claims and the EPEC contributions) in its analysis, the IUOE Defendants now argue, in essence, that Plaintiffs are somehow responsible for, and thus bound by, the oversights in the Courts analysis, which warrants denying reconsideration under Local Rule (L.R.) 7-18(c). They also argue that reconsideration would be futile without citing any authority demonstrating that futility is an issue in a motion for reconsideration and urge the Court to rely on facts outside the pleadings to find that certain claims are barred by the statute of
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limitations, when the complaints allegations do not reflect that any of the claims are untimely.1 Defendants are wrong, and their blame game fails to carry the day. In truth, Defendants did not even argue, in challenging standing in their Motion to Dismiss, that the forced EPEC contributions do not satisfy RICO standing. (See Dkt. 83 at 3-6 (arguments regarding RICO standing).) Nor did Defendants even argue, in challenging the aiding and abetting claim, that aiding and abetting liability was foreclosed under the state law claims; rather their Motion addressed only the federal statutory claims. (See Dkt. 83 at 24-25 (arguments regarding aiding and abetting liability).) Plaintiffs Motion should be granted. At a minimum, for the reasons stated in Plaintiffs opening brief and herein, the Court should reconsider its dismissal of the claims with prejudice. II. THE IUOE DEFENDANTS ARGUMENTS ARE MERITLESS A. Defendants Claims That Plaintiff Cannot Support Reconsideration of the Wholesale Dismissal of the RICO Claims under Rule 7-18(c) Are Erroneous
1.
Plaintiffs Motion is Not Procedurally Improper, As Defendants Contend
Defendants first argue that Plaintiffs seek to present arguments not previously presented, which supposedly precludes reconsideration under L.R. 718(c). This misstates the law. In fact, a party seeking reconsideration is barred
The IUOE Defendants assert that, prior to this Courts challenged order, Plaintiffs had already been given two opportunities to amend their complaint. This is misleading. As Defendants know, neither of those opportunities were provided by the Court after any analysis by the Court of Plaintiffs allegations. Rather, they were voluntary amendments by Plaintiffs.
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from presenting arguments that they did previously present (L.R. 7-18), such that Plaintiffs took care in their Motion not to rehash prior arguments. Further, Defendants mischaracterize Plaintiffs argument. Plaintiffs are contending that the Court disregarded their material allegations (i.e., facts that must be presumed as true, at this stage) about EPEC contributions in its analysis of RICO standing. That is an argument that Plaintiffs did not previously present, since, obviously, Plaintiffs had no occasion to argue that the Court was disregarding the EPEC contributions, until after the Court issued its order. This is a permissible ground for reconsideration. L.R. 7-18(c). To the extent Defendants are arguing that Plaintiffs did not previously point to their allegations about EPEC contributions, Defendants are not being candid. As Plaintiffs have previously pointed out, they did cite those allegations in opposing Defendants Motion to Dismiss. (See Motion at 3:7-11, citing Plaintiffs Opposition to Motion to Dismiss, Dkt. 125 at 4:18-5:4 and n. 4.) In considering Defendants standing argument, the Court was required to consider those allegations, but, as its standing analysis confirms, it overlooked them. This was likely due in part to the fact that Defendants in their own Motion to Dismiss challenging RICO standing did not argue that the EPEC contributions do not satisfy RICO standing. (See Dkt. 83 at 3-6.) The parties agree (Motion at 3:11-16, Opposition at 3) that the Courts Order mentioned that the allegations existed (Order at 2:20-28) in its recitation of the facts. However, that in no way demonstrates the Court plainly considered the allegations in connection with the standing issue, as Defendants now speciously claim. (Opposition at 3:22-23.) It is undisputed that the Orders analysis of RICO standing entirely ignored the EPEC-related allegations. (See Order at 8-9.) Apparently cognizant that the Court did not, in fact, analyze the EPEC allegations as to the standing issue, Defendants turn to an alternative argument that Plaintiffs are to blame, since they did not argue that the EPEC contributions were
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a basis for standing. (Opposition at 4.) However, as noted above, Defendants did not argue that the forced EPEC contributions cannot satisfy RICO standing. (See Dkt. 83 at 3-6.) Rather, as their Motion makes clear, Defendants simply disregarded Plaintiffs allegations about EPEC contributions in arguing that standing was lacking. Plaintiffs, for their part, did point the Court to the allegations about forced EPEC contributions in their opposition brief. (Dkt. 125 at 4:18-5:4 and n. 4.) Regardless of whether Plaintiffs could have emphasized them more, the fact remains that the Court was required to consider the Complaint in its entirety, not in a vacuum, as Defendants urged the Court to do. Rescuecom Corp. v. Google Inc., 562 F.3d 123, 127 (2nd Cir. 2009) (On a motion to dismiss under Rule 12(b)(6), the court must accept as true all of the factual allegations set out in plaintiff's complaint, draw inferences from those allegations in the light most favorable to plaintiff, and construe the complaint liberally.) Notwithstanding Defendants current efforts to blame Plaintiffs for not focusing the Courts attention on the EPEC allegations in Plaintiffs defense of RICO standing, there was little reason for Plaintiffs to do so, because Defendants standing argument did not argue that the EPEC contributions could not satisfy standing. And the Court, in its Order, did not hold that the EPEC contributions cannot satisfy RICO standing, despite dismissing the RICO claims in their entirety, with prejudice, on standing grounds. Contrary to Defendants suggestion, Plaintiffs have not brought their reconsideration motion to raise new arguments or to present evidence for the first time (Opposition at 4:27-28). Defendants never argued that the EPEC contributions did not satisfy the standing requirement, so Plaintiffs had little reason to argue to the contrary. But the allegations which, at the motion to dismiss stage, are facts were in the SAC and referenced in Plaintiffs opposition brief. Plaintiffs are not re-arguing their prior opposition or raising new alternative
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arguments, since Defendants did not even argue that the EPEC contributions did not satisfy standing in the Motion to which Plaintiffs were required to respond. Rather, Plaintiffs are arguing that the Court, in its Order, disregarded material facts which Plaintiffs unquestionably pled and referenced in opposing Defendants Motion to Dismiss. Instead of addressing Plaintiffs authorities which involved successful motions under L.R. 7-18(c), Defendants proffer cases involving different facts, different procedural stages, and/or different grounds for reconsideration. Understandably, Defendants choose not to discuss the facts of their cited authorities. Union Pac. R.R. v. Coast Packing Co., 236 F.Supp.2d 1130 (C.D. Cal. 2002) (Opposition at 4), for example, involved plaintiff Union Pacifics motion for reconsideration after the grant of the defendants motion for partial summary judgment. The court denied reconsideration because Union Pacific had failed to offer admissible evidence in the summary judgment proceedings, and thus could not support its claim of error. 236 F.Supp.2d at 1138. Similarly, Pretroysan v. AMCO Ins. Co., No. CV 12-06876 SJO (CWx), 2013 WL 3989234 (C.D. Cal. Aug. 2, 2013) involved a motion for reconsideration that was predicated on the plaintiffs alleged discovery of new evidence after the court had granted the defendants motion for summary adjudication. The Pretroysan court held: Even assuming arguendo that the Change Request constitutes new evidence that could not have been previously discovered by Plaintiff through the exercise of reasonable diligence, the Court finds that this new evidence does not justify reconsideration of its Prior MSJ Order. Id., at *3. Pretroysan plainly has no relevance here. Unlike the new evidence at issue there, here, the pleaded facts relevant to the RICO standing issue, which were overlooked by the Court in considering Defendants Rule 12(b)(6) standing argument, are sufficient to demonstrate standing.
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2.
The Court Should Reject Defendants Procedurally Flawed Argument That It Would be Futile to Reconsider the Standing Ruling
Defendants next argument boldly asks the Court to disregard the truth of Plaintiffs allegations and to hold that reconsideration would be futile because Plaintiffs cannot allege that any Plaintiff suffered injury from a so-called forced EPEC contribution during the statute of limitations period. (Opposition at 5.) This statute of limitations-based futility argument, like the reargument contention debunked above, fails for numerous reasons. First, Defendants cite no authority suggesting that futility is the standard at the motion for reconsideration stage, no doubt because futility is not the standard under L.R. 7-18. Second, despite their present claims about what Plaintiffs cannot allege, Defendants cite no authority (and cited none in their prior Motion to Dismiss) requiring Plaintiffs to identify the details of forced contributions by particular Plaintiffs on particular dates, in the face of Plaintiffs allegations that all union employees had to make such contributions. As shown by the authorities cited by Plaintiffs below, Plaintiffs need not plead themselves within the statute of limitations, which is an affirmative defense. Further, a Hobbs Act-based RICO claim is not a fraud-based one subject to Rule 9(b) pleading standards. As such, the dates and amounts of individual Plaintiffs contributions have no bearing on the motion to dismiss analysis. Plainly, if all employees had to make such contributions, then any employees among Plaintiffs would have had to do so, and the Court could properly infer as much. Peloza v. Capistrano Unified School Dist., 37 F.3d 517, 521 (9th Cir. 1994) (Courts must assume that all general allegations embrace whatever specific facts might be necessary to support them.).2 Indeed, in the first sentence of the
And, in fact, Defendants in the procedurally improper Declaration of Seth Morris that this Court cannot consider now concede that five of Plaintiffs made EPEC contributions, while members of the pleaded EPEC PAC Sub-Class. That
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Background section of their prior Motion to Dismiss, Defendants admitted that several of Plaintiffs served as officers and trustees. (Dkt. 83 at 2:16-17.) As such, since all union employees had to make such contributions, any Plaintiffs who were employees therefore had to make such contributions. Plaintiffs allegations were sufficient. Third, as Defendants now recognize (Opposition at 6), Plaintiffs have now alleged, in their TAC filed pursuant to this Courts Order two days after the instant Motion for Reconsideration was filed, that [i]n addition to plaintiffs Pette, Himmelberg and McLaughlin, plaintiffs Nelson and Crooks were required to, and did, make mandatory EPEC contributions, under the threat of loss of employment [i]f they refused to do so. (TAC 126.) Again, at the pleadings stage, these allegations must be accepted as true. Barker v. Riverside Cnty. Office of Educ., 584 F.3d 821, 824 (9th Cir. 2009) ([W]e accept as true the facts alleged in the complaint, and we must draw inferences in the light most favorable to the plaintiff.). Nevertheless, Defendants, despite citing no authority for their argument, suggest that Plaintiffs have to plead themselves within the statute of limitations. There is no such requirement. To the contrary, it is black letter law that the bar of the statute of limitations must be shown on the face of the pleadings, and the pleadings must also definitively show that no tolling is possible. Von Saher v. Norton Simon Museum of Art at Pasadena, 592 F.3d 954, 969 (9th Cir. 2010) (A claim may be dismissed under Rule 12(b)(6) on the ground that it is barred by the applicable statute of limitations only when the running of the statute is apparent on the face of the complaint.) (emphasis added); Huynh v. Chase Manhattan Bank, 465 F.3d 992, 997 (9th Cir.2006); Cervantes v. City of San Diego, 5 F.3d 1273, 1275 (9th Cir. 1993) (When a motion to dismiss is based on Sub-Class consists of employees of Local 501 and its affiliated trusts. (See SAC 266, TAC 280.)
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the running of the statute of limitations, it can be granted only if the assertions of the complaint, read with the required liberality, would not permit the plaintiff to prove that the statute was tolled.). Here, neither the face of the SAC nor the face of the TAC establishes that contributions made by Plaintiffs occurred more than four years prior to the filing of this action. Plaintiffs Nelson and Crooks need not allege that they made their EPEC contributions within the four years prior to the filing of this action. Nothing in the pleadings establishes that the mandatory EPEC contributions that they allege they made occurred outside the statute of limitations period. Nelson, for example, alleges he was an employee until 2010. (TAC 14.) Defendants limitations-based futility argument fails on that basis alone. However, black letter law is no obstacle to Defendants advocacy. Despite these hoary pleading principles, they go far outside the pleadings in opposing reconsideration, relying on untested testimony from a previously unidentified IUOE employee. (See Decl. of Seth Morris, Dkt. 162-3.) Mr. Morris purports to testify about the supposed contents of contribution records maintained by IUOE (Opposition at 6-7.) 3 But, setting aside that Defendants did not seek the Courts permission to offer this testimony in connection with their Motion previously, the Court cannot consider such evidence to contradict Plaintiffs allegations or to hold
Defendants footnote suggesting that the Court may take judicial notice of Mr. Morriss summary of the contribution information allegedly maintained in a database by IUOE (Opposition at 7, n. 3) is absurd. A witnesss untested summary testimony about supposed internal records is not subject to judicial notice, nor do Plaintiffs concede that any records that the IUOE may have submitted to the FEC (but which the IOUE has not provided to Plaintiffs or the Court) would be records whose accuracy could not reasonably be questioned particularly given Plaintiffs many allegations about inaccurate government filings made by defendants in this case. Beyond venturing outside the pleadings, Mr. Morris testimony about the contents of internal records also violates the best evidence rule since he is purporting to testify about the contents of specific alleged database entries, when neither the database nor even the entries in question have been provided to Plaintiffs or the Court. Given that Mr. Morris falsely asserts in his declaration that EPEC contributions are voluntary, the fact that Plaintiffs have had no opportunity
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that the statute of limitations renders Plaintiffs allegations futile, without providing notice that Defendants Motion would be converted to a Rule 56 motion and permitting all parties to present all materials pertinent to the motion. Jablon v. Dean Witter & Co., 614 F.2d 677, 682 (9th Cir. 1980) (If the motion is treated as one for summary judgment, all parties shall be permitted to present all material pertinent to the motion.); Rubert-Torres v. Hospital San Pablo, Inc., 205 F.3d 472, 475 (1st Cir. 2000) (conversion of Rule 12 motions to Rule 56 motions is highly disfavored, particularly where discovery is in its infancy or not underway).4
3.
Defendants Third Argument that the EPEC Allegations Do Not Support a Plausible RICO Claim Was Not Previously Accepted and Should Not Be Now.
Ironically, despite wrongly accusing Plaintiffs of re-argument, Defendants next attempt to use their Opposition to make arguments of the same nature that they previously presented to the Court and that the Court did not previously accept. The Courts Order was clear as to the basis for its dismissal of the RICO claims. the Court held: Plaintiffs allegations are, however, insufficient for two reasons. First, Section 1964(c) requires that a plaintiff suffer damage to his business or property. . . . The injuries alleged, however, inhere to Local 501 and its ERISA funds, none of which is a named plaintiff in this case. to depose him also counsels against crediting his declaration, its procedural impropriety aside. Moreover, aside from a footnote, Defendants did not even argue let alone convince the Court in their Motion to Dismiss that the statute of limitations barred Plaintiffs claims, let alone barred any and all allegations by any Plaintiffs regarding forced EPEC contributions. Defendants assertion that Plaintiffs did not contest (Opposition at 9) their footnote statute of limitations argument means nothing, since that argument was unwinnable on its face, as the pleadings did not establish that no Plaintiffs made EPEC contributions during the relevant statute of limitations period.
4
First,
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(Order, at 6.) Nothing in that analysis relates to any of the re-argued points now raised by Defendants in Section I.C. of their Opposition. Then, the Court stated: Second, and on a related note, there must be a direct relationship between the injury and the alleged racketeering activities. . . . Plaintiffs, however, at best allege only indirect injury to themselves. (Order, at 7, citations omitted.) The Courts discussion of the directness of the injury is simply a part of the Courts standing analysis. Finally, in concluding its RICO discussion, the Court stated: The various racketeering acts alleged in the SAC harmed Local 501 and its benefit funds, not Plaintiffs. Even if Plaintiffs had identified any non-speculative injury to themselves, any such harm would be the indirect result of direct injuries to the non-party union and plans. (Order, at 7.) Thus, the Court underscored the fact that its ruling as to Plaintiffs RICO claims was based solely on standing grounds. Yet, by raising arguments that were briefed but not addressed (let alone accepted) in the Courts Order, Defendants seem to be asking the Court to reconsider their own prior arguments. But a district court is under no obligation to discuss arguments not worthy of discussion: [T]he law does not require courts to provide an exhausting analysis of every minor argument that parties raise. Rather, it is left to the the judge's own professional judgment, whether to address a particular argument or not. Rita, 551 U.S. at 356, 127 S.Ct. 2456. This Court reviewed plaintiffs' submissions carefully. This Court is satisfied that it stated its reasons clearly and thoroughly, and expressly addressed those arguments that most merited discussion. Gutierrez v. Johnson & Johnson, 743 F. Supp. 2d 418, 423-24 (D.N.J. 2010). Here, the Courts election to discuss only standing strongly suggests that Defendants other arguments were insufficiently compelling to warrant discussion,
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or at least insufficiently compelling to warrant dismissal with prejudice, which was the result based on the standing analysis.5 The only question now before the Court is whether reconsideration is warranted under L.R. 7-18(c) on the ground that the Court overlooked material facts regarding the forced EPEC contributions, which Defendants themselves did not even argue did not satisfy standing. Defendants additional RICO-related arguments provide no basis to deny reconsideration of the dismissal without prejudice of the RICO claims based on the standing issue. Even if the Court were inclined to re-entertain Defendants non-standing based arguments, such arguments merely demonstrate the Courts with prejudice dismissal should be reconsidered. The allegations that Defendants claim are lacking, regarding, e.g., a RICO enterprise focused on the EPEC allegations, are allegations that could plainly be supplied through amendment. Such amended allegations would be proper since, if the Court grants reconsideration as to the EPEC-related allegations, Plaintiffs RICO allegations will have been significantly narrowed from the prior allegations in the SAC. Plaintiffs have not undertaken to draft new allegations yet, since their RICO claims were dismissed in their entirety based on the standing issue and since Plaintiffs need not draft new allegations in order to establish that reconsideration is warranted under Local Rule 7-18. However, Plaintiffs could do so. Defendants non-standing arguments are meritless. For example, Defendants now assert: The Courts standing discussion does clearly express the holdings that warrant reconsideration. When the Court said that the alleged racketeering harmed Local 501 and its benefit funds, not Plaintiffs, it overlooked the allegations about EPEC fund contributions taken directly from individuals with threats of termination. See, e.g., SAC 75-80, 266. Similarly, when the Court said that any harm would be the indirect result of direct injuries to the non-party union and plans, it overlooked the allegations as to the EPEC fund, where forced cash contributions were extracted directly from Plaintiffs under threat of termination for failure to comply. Ibid.
5
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The Third Amended Complaint does not suggest that the alleged mandatory contribution requirement led to [Moving Defendants] control or acquisition over a RICO enterprise, as required under 1962(b), Wagh v. Metris Direct, Inc., 363 F.3d 821, 830 (9th Cir. 2003) (internal quotation marks omitted), overruled on other grounds by Odom v. Microsoft Corp., 486 F.3d 541, 551 (9th Cir. 2007) (en banc), or that Moving Defendants participate[d] in the operation or management of the enterprise through the alleged mandatory contribution requirement, as required under 1962(c). (Opposition, at 8-9.) Defendants complaint about what the TAC does not contain is a strange one. Obviously, it does not include such allegations, because the Court dismissed Plaintiffs RICO claims with prejudice and Plaintiffs could not simply allege different RICO claims with new allegations without violating the Courts order. However, the prior enterprise definition could be redefined, if reconsideration were granted as requested by Plaintiffs Motion. For example, focusing solely on the EPEC contributions and the threats to obtain them, the enterprise could appropriately be defined as follows: The IUOE EPEC Fund constitutes an enterprise as that term is defined by 18 U.S.C. 1961(4). The General Executive Board of IUOE is an association of individuals that constitutes an enterprise as that term is defined by 18 U.S.C. 1961(4). The IUOE, the General Executive Board and its associated political action fund is an association in fact of entities that constitute an enterprise as that term is defined by 18 U.S.C. 1961(4) (hereinafter, these enterprises are referred to as the IUOE EPEC ENTERPRISES). Plainly, by threatening employees jobs to extort mandatory political contributions from them, a defendant would be engaging in the conduct of the IUOE EPEC ENTERPRISES affairs through a pattern of racketeering activity. An enterprise is
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any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity. 18 U.S.C. 1961(4).6 Under the above-proposed formulation of enterprise definitions, all racketeering elements surrounding the enterprise requirement are satisfied: Section 1962(c), the most often charged RICO offense, was intended to prevent the operation of a legitimate business or union through racketeering. David B. Smith & Terrance G. Reed, Civil RICO, 5.01, p. 52 (Matthew Bender & Co.2000). 18 U.S.C. 1962(c) imposes liability to a discrete group, i.e. those who conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity. The Court has narrowly interpreted the term conduct to hold liable only those individuals who participate in the operation or management of the enterprise itself. Reves v. Ernst & Young, 507 U.S. 170, 185, 113 S.Ct. 1163, 1173, 122 L.Ed.2d 525 (1993); See also Bachman v. Bear, Stearns & Company, Inc., 178 F.3d 930, 932 (7th Cir.1999) (to conduct the affairs of an enterprise, there must be at least some measure of control over the enterprise). A defendant need not be upper level management to satisfy the operation or management test, rather a
Defendants in the Ninth Circuit routinely argue that a RICO defendant cannot be a part of the enterprise itself. That is incorrect: Rae does not control the case at bar. Rather, it stands for the proposition that a single individual or entity cannot be both the RICO enterprise and an individual RICO defendant. Rae simply embodies the maxim that an individual cannot associate or conspire with himself, and in subsequent decisions we have adhered to this narrow reading of Rae. River City Markets, Inc. v. Fleming Foods W., Inc., 960 F.2d 1458, 1461 (9th Cir. 1992). A RICO defendant cannot also be the entire RICO enterprise, but a RICO defendant can be a part of the enterprise. The above-proposed enterprise definitions tailored specifically to the racketeering activity surrounding EPEC
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defendant may participate in the conduct of an enterprise by knowingly implementing decisions, as well as by making them. MCM Partners, Inc. v. AndrewsBartlett & Associates, Inc., 62 F.3d 967, 978 (7th Cir.1995) (citing United States v. Oreto, 37 F.3d 739, 750 (1st Cir.1994)). In re MasterCard Int'l Inc., Internet Gambling Litig., 132 F. Supp. 2d 468, 487-88 (E.D. La. 2001) aff'd sub nom. In re MasterCard Int'l Inc., 313 F.3d 257 (5th Cir. 2002). Here, it could readily be alleged that the IUOE Defendants participated in the operation or management of the enterprises proposed herein and used that control to engage in the EPEC fund racketeering overlooked in this Courts Order.7 B. The Court Should Likewise Reject Defendants Argument Regarding the Dismissal of the Aiding and Abetting Claim Relying again on arguments that Plaintiffs are at fault (Opposition at 10-11), Defendants also argue that the Court should maintain its dismissal, with prejudice, of the aiding and abetting claim. Defendants are mistaken. Defendants do not contest that (1) state law allows for aiding and abetting liability regardless of federal law regarding aiding and abetting; (2) Defendants recognized in their motion that the SAC contained a claim for breach of fiduciary contributions are devised with the narrow prohibition of Rae v. Union Bank, 725 F.2d 478 (9th Cir.1984) in mind. Defendants also assert again, in an argument that the Court need not consider at the present procedural stage that the EPEC contribution scheme did not lead to control or acquisition of a RICO enterprise. Putting aside that Plaintiffs have not yet had an opportunity to plead a narrower RICO claim, Defendants are wrong. The IUOEs systemic threats to the job security of local employees who do not make the mandatory contributions to its EPEC fund (even though such local employees are employed by Local 501 or its affiliated funds, not IUOE) go hand-in-hand with other allegations related to the usurpation of control of Local 501. Although this Court concluded that other aspects of Plaintiffs RICO claims in the SAC are not by themselves actionable on standing grounds, the Hobbs Act violations used to force EPEC fund payments are thematically related to the allegation of unlawful control of the Local 501 Enterprise (as alleged in the SAC). After all, domination of the leadership of an organization is tantamount to control of the entire organization.
7
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duty under common law (Dkt. 83 at 23:17); and (3) Defendants also recognized that the SAC contained a UCL claim, which they conceded they were not challenging because it was then stated only against other defendants. (Dkt. 83 at 1:26.) Nor do Defendants even argue that they challenged aiding and abetting liability under state law. In fact, they did not. After recognizing that the SAC contained a UCL claim and a breach of fiduciary duty claim under California law, Defendants made their arguments about aiding and abetting, which did not argue that aiding and abetting could not be stated under state law, and did not even discuss the common law fiduciary duty claim, but rather only the federal statutory claims. (Dkt. 83 at 24-25). Since Defendants argument addressed solely the federal claims, why then, should Plaintiffs have argued as Defendants now say they should have that a claim for aiding and abetting under California law could be stated with respect to their common law breach of fiduciary duty claim? Plaintiffs had no reason to do so, and Defendants offer none.8 Plaintiffs have now amended the UCL claim to state claims against Defendants, as the Court granted them leave to do. Plaintiffs have also clarified and expanded on their common law breach of fiduciary duty allegations to address the concerns the Court raised in its Order. Plaintiffs have been unable, however, to plead new aiding and abetting allegations to accompany those amended claims, because doing so is currently foreclosed by the Courts dismissal with prejudice.
Defendants have a lot of gall. Despite making no reference to the state law claims in their Motion to Dismiss argument about aiding and abetting liability, Defendants now devote two pages of misguided argument to complaining that Plaintiffs did not seek to defend the availability of aiding and abetting liability as to the state law claims. Plaintiffs are not seeking to cure a deficiency as Defendants suggest. (Opposition at 11:9.) Plaintiffs had no reason to cite principles of state law regarding aiding and abetting of state law claims, since Defendants did not argue that aiding and abetting could not exist under California law for the California state law claims.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 III.
Reconsideration is warranted and in the interests of justice, as the Court simply overlooked Plaintiffs state law claims. Aiding and abetting liability as to those claims should not have been foreclosed with prejudice, based on federal law, especially when Defendants themselves did not even argue that such state law aiding and liability could not exist. Rather than articulating any good or legal reason to deny reconsideration in opposition, Defendants offer only misplaced finger-pointing. Plaintiffs motion should be granted. THE ABM DEFENDANTS FAIR NOTICE ARGUMENT IS NOT A BASIS TO DENY PLAINTIFFS MOTION The ABM Defendants single additional argument fares no better. They argue against reconsideration of the dismissal of the aiding and abetting claim on the supposed ground that Plaintiffs have not yet alleged enough facts to support aiding and abetting liability against them. (Dkt. 164 at 2.) This argument has no bearing on the stated ground for Plaintiffs motion for reconsideration, which is that the Court failed to consider that Plaintiffs had state law claims in dismissing the claim based entirely on federal law. The Court did not dismiss the claim because it failed to provide fair notice to the ABM Defendants, but rather because of its conclusion based on federal law regarding federal claims. In the TAC, Plaintiffs have now alleged common law claims for breach of fiduciary duty and UCL violations that could, with additional aiding and abetting allegations, support aiding and abetting liability under California law. Yet the ABM Defendants complain that Plaintiffs have to date not identified facts supporting aiding and abetting against them. This is hardly surprising. Since Plaintiffs aiding and abetting claim was dismissed with prejudice, Plaintiffs could not plead a claim for aiding and abetting in the TAC, with respect to the state law claims stated therein. Even if Plaintiffs had already pled common law aiding and abetting against the ABM Defendants with respect to the two state law claims, and even if the Court had held that Rule
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8s fair notice standard had not yet been satisfied, the Court would almost certainly not have dismissed the claim with prejudice, as it did in the Order in reliance on federal law. IV. CONCLUSION For the reasons set forth in their Motion and herein, Plaintiffs respectfully request that their motion for reconsideration be granted. In the event that, after granting reconsideration, the Court believes further amendments are needed to state RICO claims based on the EPEC allegations, or to allege aiding and abetting of the state law claims, Plaintiffs reiterate their Motions closing request that they be permitted leave to amend. Respectfully submitted Dated: November 4, 2013 MOORE & LEVIANT LLP By: /s/ J. Mark Moore J. Mark Moore H. Scott Leviant Attorneys for Plaintiffs

165 Reply Re Motion For Reconsideration - Local 501

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Case 2:12-cv-09324-DDP-VBK Document 165 Filed 11/04/13 Page 1 of 21 Page ID #:2856

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II. THE IUOE DEFENDANTS ARGUMENTS ARE MERITLESS .................3

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Local Rule 7-18(c) .......................................................................................... passim

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Plaintiffs Motion is Not Procedurally Improper, As Defendants Contend

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