Rae H. Lorenz et al v. East West Bancorp Inc. et al

Filing 32

MINUTES (IN CHAMBERS) by Judge Christina A. Snyder RE: Defendants East West Bancorp. Inc. and East West Bank's Motion to Dismiss 12 . the Court DENIES defendants' motion to dismiss the claims asserted against defendant East West Bank. The Court GRANTS, without prejudice, defendants' motion to dismiss all claims asserted against defendant East West Bancorp, Inc., as plaintiffs' have failed sufficiently to plead alter ago liability. Plaintiffs shall have until and including 2/8/2016 to file a first amended complaint addressing the deficiencies identified herein. Failure to do so may result in dismissal of defendant East West Bancorp, Inc. with prejudice. Court Reporter: Not Present. (gk)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-06336-CAS(FFMx)

Title

RAE H. LORENZ, ET AL. v. EAST WEST BANCORP, INC. ET AL.

Present: The Honorable

Date

‘O’

January 14, 2016

CHRISTINA A. SNYDER

Catherine Jeang
Deputy Clerk

Not Present
Court Reporter / Recorder

N/A
Tape No.

Attorneys Present for Plaintiffs:

Attorneys Present for Defendants:

Not Present

Not Present

Proceedings:

(IN CHAMBERS) - DEFENDANTS EAST WEST BANCORP,
INC. AND EAST WEST BANK’S MOTION TO DISMISS (dkt.
12, filed September 10, 2015)

The Court finds this motion appropriate for decision without oral argument. See
Fed. R. Civ. P. 78; C.D. Cal. Local Rule 7-15.
I.

INTRODUCTION

On July 28, 2015, plaintiffs Rae H. Lorenz, William E. Ward, Paula and Steven
Tamkin, Sue Haynes, Richard T. Cole, William H. Woolbright, Irving B. Ruppel,
Kenneth Nelson, Michael Charpenter, Loralee Freilich, and Loretta J. Alman
(collectively, “plaintiffs”) filed the instant action against defendants Charter Investments,
Inc. (“Charter”), Michael Gurevich, William Kent, and Samson Emelianov (collectively,
“the Charter defendants” or simply “Charter”); as well as defendants East West Bancorp,
Inc. and East West Bank (collectively, “East West” or “the East West defendants”),
alleging claims against the Charter defendants for (1) fraud, (2) breach of fiduciary duty,
and (3) conversion; claims against the East West defendants for (4) aiding and abetting
fraud, (5) aiding and abetting breach of fiduciary duty, (6) and aiding and abetting
conversion; and claims against all defendants for (7) violation of California Business and
Professions Code §17200, et seq. See Dkt. 1 (Notice of Removal), Ex .2 (“Compl.”). On
August 19, 2015, the East West defendants removed this action to federal court on the
grounds of diversity jurisdiction. Dkt. 1.
On September 10, 2015, the East West defendants filed a motion to dismiss
plaintiffs’ four claims against them, pursuant to the Federal Rules of Civil Procedure 9(b)
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-06336-CAS(FFMx)

Date

January 14, 2016

Title

RAE H. LORENZ, ET AL. v. EAST WEST BANCORP, INC. ET AL.

and 12(b)(6). Dkt. 12 (“Motion”). Plaintiffs filed an opposition to defendants’ motion on
September 28, 2015, dkt. 14 (“Opp’n”), and the East West defendants filed a reply on
October 5, 2015, dkt. 15 (“Reply”). Having carefully considered the parties’ arguments,
the Court finds and concludes as follows.
II.

BACKGROUND

Plaintiffs allege that on or about October 2013, defendant Charter Investments
opened a bank account at East West Bank’s Balboa Branch in San Francisco, California.1
Compl. ¶ 13. According to the complaint, East West “determined Charter Investments to
be a legitimate business eligible to maintain a business account on the basis of a reference
by [one of East West’s] high value customer[s].” Id. ¶ 38. The gravamen of plaintiffs’
complaint is that from at least October 2013 through March 2014, defendant Charter
Investments defrauded potential investors by soliciting, through various website domains,
funds to invest in “brokered CDs”––i.e., “[certificates of deposit] issued by banks for
customers of brokerage firms.” Id. ¶¶ 26, 39. Plaintiffs allege that rather than invest
plaintiffs’ money into CDs, Charter instead used an East West Bank account to wire
transfer plaintiffs’ investment money to third-party accounts in “overseas banking
secrecy havens.” See id. Specifically, plaintiffs allege that Charter advertised its
business nationwide on three internet domains (CharterInvestmentsInc.com,
CharterInvestments-Inc.com, and CharterInvestmentsLLC.com), each of which redirected
to a website containing the following statement:
Charter Investments offers investors brokered CDs, which are
CDs issued by banks for customers of brokerage firms. The
CDs are usually issued in large denominations and the
brokerage firm divides them into smaller denominations for
resale to its customers. Because the deposits are obligations of

1

More specifically, the complaint alleges that Charter’s East West Bank account
was opened by individual defendants Samson Emelianov, Charter’s President (“using a
Russian passport and purporting to reside in Russia”), and Michael Gurevich, Charter’s
“Secretary” (using a Russian passport and purporting to reside in Belmont, California”).
Compl. ¶¶ 30-31.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-06336-CAS(FFMx)

Date

January 14, 2016

Title

RAE H. LORENZ, ET AL. v. EAST WEST BANCORP, INC. ET AL.

the issuing bank, and not the brokerage firm, FDIC insurance
applies.
Id. ¶ 39. The website also contained a table listing the term lengths and purported rates
of return on the certificates of deposit that Charter offered. Id.
Paragraphs 40 through 90 of the complaint detail numerous allegations of specific
wire transfers that each individual plaintiff made to Charter’s East West Bank account
between January 13, 2014 and February, 26, 2014. See id. ¶¶ 40-90. According to the
complaint, East West Bank reviewed, collected, and retained all incoming wire transfer
payment order information for Charter Investments under account number 8602000468.
Id. ¶ 42. Generally, each of these wire transfers, which collectively amounted to millions
of dollars, were allegedly made “for the purpose of [purchasing] a certificate of deposit,”
with the “wire transfer instructions [specifically] indicat[ing] that the funds were to be
credited for the benefit of [the particular named plaintiff who was wiring the funds].”
See, e.g. id. ¶ 40. For three of these wire transfers––those on January 15, 2014, January
17, 2014, and February 11, 2014, respectively––plaintiff Richard T. Cole, plaintiff Rae
H. Lorenz, and a relative of plaintiff William H. Woolbright allegedly informed East
West representatives that they were going to invest in Charter Investments and
accordingly requested, and received from East West, “confirmation that Charter
Investments maintained a legitimate account at East West Bank.” Id. ¶¶ 41, 45, 75.
The complaint also alleges that between January 16, 2014 and February, 27,
2014––roughly the time period corresponding to plaintiffs’ purported investment
payments to Charter’s East West account––East West approved Charter’s wire transfers
amounting to millions of dollars to various banks in the British Virgin Islands, id. ¶¶ 43,
49, 56, 63, 67, 80, 87-89, 91; Latvia, id. ¶¶ 43, 48, 49, 53, 56, 59, 60, 62, 64, 68, 70-74,
77, 81, 83-85, 91; Panama, id. ¶¶ 50, 54, 68, 71-74, 77, 84, 85; and Cyprus, id. ¶¶ 63, 65,
66, 69, 80, all of which are allegedly “listed by the United States Department of State as
Jurisdictions of Primary Concern among known money laundering countries,” id. ¶¶ 44,
51, 66.
According to plaintiffs, the East West defendants, at some unspecified point in
time, “determined Charter Investments to be a high risk potential customer . . . subject to
enhanced due diligence pursuant to its Anti-Money laundering and Know Your Customer
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-06336-CAS(FFMx)

Date

January 14, 2016

Title

RAE H. LORENZ, ET AL. v. EAST WEST BANCORP, INC. ET AL.

policies.” Id. ¶ 33. Thus, “as part of its enhanced due diligence procedures,” East West
was purportedly “required to, and did visit the Charter Investments [CD brokerage]
websites.” Id. ¶ 94. Plaintiffs further allege that “as a result of its enhanced due
diligence procedures,” East West “had concerns about the legitimacy of Charter
Investments, which purported to be an [internet telephone] import export business, [but]
had no prior business history, was incorporated out of state, and had no verifiable
physical business address.” Id. ¶¶ 32, 37.
Plaintiffs further aver that “early on[,] while millions of dollars remained in
[Charter’s East West Bank] account, at least the Balboa Branch Manager of East West
Bank determined Charter Investments to be an illegitimate and fraudulent entity.” Id. ¶
92. More specifically, plaintiffs aver that “at least the Balboa Branch Manager of East
West Bank” (1) “determined that investors were depositing IRA and normal cash into the
single Charter Investments account”; (2) “determined that the investment money was
quickly transferred from the Charter Investments account to third party accounts in
banking secrecy havens”; and (3) accordingly “suggested freezing the account.” Id.
Despite the alleged findings and suggestions of East West’s Balboa Branch Manager,
defendant East West Bank nonetheless allegedly “decided that because of its relationship
with its High Value customer, which had stood as a reference with Charter Investments, it
would simply monitor the account activity” rather than freeze the account. Id.
The complaint further alleges that “after at least the Balboa Branch Manager”
found “Charter Investments to be an illegitimate and fraudulent entity[,] the Balboa
Branch continued to approve and place [Charter’s] wire transfers to banking secrecy
havens.” Id. ¶ 93. Accordingly, “by approving and conducting numerous wire transfers
from the Charter Investment accounts at East West Bank to bank accounts in Banking
Secrecy Havens held by unknown entities,” East West is alleged to have “substantially
assisted Charter Investments” in its fraudulent scheme. Id. ¶ 95.
The complaint also alleges that a representative at East West Bank, “knowing that
Charter Investments was a fraudulent company,” contacted the banks of plaintiffs
William Ward and Ken Nelson in order “to inform [them] that Charter Investments was
under investigation for fraud.” Id. ¶¶ 96-97. Despite purportedly “knowing that Charter
Investments was a fraudulent company,” East West nonetheless “approved the wire
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-06336-CAS(FFMx)

Date

January 14, 2016

Title

RAE H. LORENZ, ET AL. v. EAST WEST BANCORP, INC. ET AL.

transfer[s] of [Ward and Nelson’s] investment funds to the banking secrecy haven
countries” before these plaintiffs could request a recall of their wire transfer.2 Id.
On March 26, 2014, roughly one month after plaintiffs’ final wire transfer to
Charter’s East West Bank account, the California Department of Business Oversight
allegedly issued a Consumer Alert regarding Charter Investments, stating that Charter
Investments (1) was not licensed as a broker dealer pursuant to California Corporations
Code, (2) was not licensed as a bank pursuant to Financial Institutions Code, and (3)
could not be located at the address stated on its website. Id. ¶ 28.
In light of the foregoing allegations, plaintiffs assert, inter alia, the following:
From Charter Investments’ inception in mid- 2013, [the East
West defendants] played an integral role in Charter
Investments[’] operation and success. Any investigation of
Charter Investments by Defendant East West Bank as is
dictated by various anti-money laundering laws and banking
best practices, would have set off alarm bells requiring a
decision to cease doing business with Charter Investments.
Plaintiffs are informed and believe and on such information and
belief allege that East West Bank did determine Charter
Investments was a fraudulent scheme, but did not cease doing
business with it. Instead, Defendant East West Bank continued
to approve international wire transfers to the banking secrecy
havens until the account was drained of Plaintiffs’ money.
Id. ¶ 27.

2

Although plaintiffs do not specify the date of such contacts in these particular
paragraphs of the complaint, it appears that the relevant transfers were plaintiff Ward’s
February 4, 2014 and February 12, 2014 transfers of $750,000 and $400,000,
respectively, as well as plaintiff Nelson’s February 26, 2014 transfer of $202,926.87. See
Compl. ¶¶ 61, 79, 90.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-06336-CAS(FFMx)

Title

RAE H. LORENZ, ET AL. v. EAST WEST BANCORP, INC. ET AL.

III.

Date

January 14, 2016

LEGAL STANDARD
A.

Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6)

A motion pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal
sufficiency of the claims asserted in a complaint. Under this Rule, a district court
properly dismisses a claim if “there is a ‘lack of a cognizable legal theory or the absence
of sufficient facts alleged under a cognizable legal theory.’” Conservation Force v.
Salazar, 646 F.3d 1240, 1242 (9th Cir. 2011) (quoting Balisteri v. Pacifica Police Dep’t,
901 F.2d 696, 699 (9th Cir. 1988)). “While a complaint attacked by a Rule 12(b)(6)
motion to dismiss does not need detailed factual allegations, a plaintiff’s obligation to
provide the ‘grounds’ of his ‘entitlement to relief’ requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action will not do.”
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted).
“Factual allegations must be enough to raise a right to relief above the speculative level.”
Id. (internal citations omitted).
In considering a motion pursuant to Rule 12(b)(6), a court must accept as true all
material allegations in the complaint, as well as all reasonable inferences to be drawn
from them. Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998). The complaint must be
read in the light most favorable to the nonmoving party. Sprewell v. Golden State
Warriors, 266 F.3d 979, 988 (9th Cir. 2001). However, “a court considering a motion to
dismiss can choose to begin by identifying pleadings that, because they are no more than
conclusions, are not entitled to the assumption of truth. While legal conclusions can
provide the framework of a complaint, they must be supported by factual allegations.”
Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009); see Moss v. United States Secret Service,
572 F.3d 962, 969 (9th Cir. 2009) (“[F]or a complaint to survive a motion to dismiss, the
non-conclusory ‘factual content,’ and reasonable inferences from that content, must be
plausibly suggestive of a claim entitling the plaintiff to relief.”). Ultimately,
“[d]etermining whether a complaint states a plausible claim for relief will . . . be a
context-specific task that requires the reviewing court to draw on its judicial experience
and common sense.” Iqbal, 556 U.S. at 679.
Unless a court converts a Rule 12(b)(6) motion into a motion for summary
judgment, a court cannot consider material outside of the complaint (e.g., facts presented
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-06336-CAS(FFMx)

Date

January 14, 2016

Title

RAE H. LORENZ, ET AL. v. EAST WEST BANCORP, INC. ET AL.

in briefs, affidavits, or discovery materials). In re American Cont’l Corp./Lincoln Sav. &
Loan Sec. Litig., 102 F.3d 1524, 1537 (9th Cir. 1996), rev’d on other grounds sub nom
Lexecon, Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26 (1998). A court
may, however, consider exhibits submitted with or alleged in the complaint and matters
that may be judicially noticed pursuant to Federal Rule of Evidence 201. In re Silicon
Graphics Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999); Lee v. City of Los Angeles,
250 F.3d 668, 689 (9th Cir. 2001).
As a general rule, leave to amend a complaint which has been dismissed should be
freely granted. Fed. R. Civ. P. 15(a). However, leave to amend may be denied when “the
court determines that the allegation of other facts consistent with the challenged pleading
could not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well Furniture
Co., 806 F.2d 1393, 1401 (9th Cir. 1986); see Lopez v. Smith, 203 F.3d 1122, 1127 (9th
Cir. 2000).
B.

Heightened Pleading Requirements for Fraud under Federal Rule of
Civil Procedure 9(b)

Federal Rule of Civil Procedure 9(b) requires that the circumstances constituting a
claim for fraud be pled with particularity. Fed. R. Civ. P. §9(b). Rule 9(b)’s heightened
pleading requirements apply where a complaint specifically alleges fraud as an essential
element of the claim, is “grounded in fraud,” or “[sounds] in fraud.” Vess v. Ciba-Geigy
Corp. U.S.A., 317 F.3d 1097, 1103-04 (9th Cir. 2003). A claim is considered to be
“‘grounded in fraud’” or “‘sounds in fraud’” where the plaintiff alleges “a unified course
of fraudulent conduct and rel[ies] entirely on that course of conduct as the basis of a
claim.” Id. at 1103. But where a plaintiff simply alleges “some fraudulent and some
non-fraudulent conduct,” only the allegations of fraud are subject to Rule 9(b)’s
heightened pleading requirements. Id. at 1104 (“The rule does not require that
allegations supporting a claim be stated with particularity when those allegations describe
non-fraudulent conduct.”).
A pleading meets Rule 9(b)’s heightened pleading requirements when a false
statement is alleged and “circumstances indicating falseness” are set forth. In re
GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1548 (9th Cir. 1994), superseded by statute on
other grounds as stated in SEC v. Todd, 642 F.3d 1207, 1216 (9th Cir. 2011). Because
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-06336-CAS(FFMx)

Date

January 14, 2016

Title

RAE H. LORENZ, ET AL. v. EAST WEST BANCORP, INC. ET AL.

Rule 9(b) requires that a pleading “[identify the] circumstances constituting fraud so that
the defendant can prepare an adequate answer from the allegations,” the 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.’” Walling v. Beverly Enters., 476 F.2d 393, 397 (9th Cir. 1973); Cafasso, U.S. ex
rel. v. General Dynamics C4 Systems, Inc., 637 F.3d 1047, 1055 (9th Cir. 2011) (quoting
Ebeid ex rel. United States v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010)).
IV.

DISCUSSION

The East West defendants argue that plaintiffs fail to state a claim for which relief
can be granted pursuant to Rules 12(b)(6) and 9(b) because plaintiffs (1) do not
sufficiently plead alter ego liability as to defendant East West Bancorp, Inc.; (2) do not
meet their heightened 9(b) pleading requirements for their predicate fraud claim against
Charter Investments; and (3) do not sufficiently plead East West’s actual knowledge of
Charter’s alleged fraud and therefore fail to state claims against East West for aiding and
abetting Charter’s fraudulent conduct. The Court reviews the merits of these arguments
in the discussion that follows.
A.

Pleading Alter Ego Liability for Defendant East West Bancorp, Inc.

The East West defendants first argue that East West Bancorp, Inc. (“East West
Bancorp”) is not a proper party to the current action because parent companies generally
are not liable for the alleged misconduct of a subsidiary entity (in this case, “East West
Bank”). Motion at 9; see United States v. Bestfoods, 524 U.S. 51, 61 (1998) (“It is a
general principle of corporate law deeply ingrained in our economic and legal systems
that a parent corporation . . . is not liable for the acts of its subsidiaries.”) (internal
quotation marks and citations omitted). Specifically, East West argues that because
“[p]laintiffs erroneously plead that East West Bancorp, Inc., rather than its operating
subsidiary, East West Bank, is the defendant that opened the Charter account and
facilitated the wire transfers at issue here” and “[p]laintiffs do not otherwise allege any
alter ego relationship,” East West Bancorp should not be held liable as a parent company.
See Motion at 9.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-06336-CAS(FFMx)

Date

January 14, 2016

Title

RAE H. LORENZ, ET AL. v. EAST WEST BANCORP, INC. ET AL.

Without reference to supporting caselaw, plaintiffs contend that four paragraphs in
the complaint “clearly contain[]” allegations of an alter ego relationship between East
West Bank and East West Bancorp. Opp’n at 10 (citing Compl. ¶¶ 21-25). However, as
East West notes, these paragraphs merely contain a series of boilerplate alter ego
allegations, as to all defendants, that are insufficient to plead an alter ego relationship
between defendants East West Bancorp and East West Bank. See, e.g., id. ¶ 22
(“Defendants and each of them were and are inadequately capitalized and have no
genuine or separate existence, but were and are used and are existing for the sole purpose
of permitting the other Defendants to transact a portion of their business under a separate
guise.”), ¶ 25 (“Failure to pierce the corporate veil would promote injustice and, based
thereon, Defendants and each of them are jointly and severally liable with the other
Defendants.”).
Such “[c]onclusory allegations of ‘alter ego’ status are insufficient to state a
claim,” as plaintiffs in the instant action “must allege specifically both of the elements of
alter ego liability, as well as facts supporting each.” Neilson v. Union Bank of California,
N.A., 290 F. Supp. 2d 1101, 1116 (C.D. Cal. 2003) (Morrow, J.); see also Sandoval v.
Ali, 34 F. Supp. 3d 1031, 1040 (N.D. Cal. 2014) (plaintiffs did not “adequately” allege an
inequitable result by stating “conclusorily that ‘an inequity would result if the
corporations were not viewed as alter egos of each other and the [defendants].’”). Indeed,
California courts “generally require some evidence of bad faith conduct on the part of
defendants before concluding that an inequitable result justifies an alter ego finding.”
Neilson, 290 F. Supp. 2d at 1117 (dismissing claims asserted on an alter ego theory of
liability against defendant Comerica Bank because complaint failed sufficiently to allege
“that Comerica engaged in any bad faith conduct in its acquisition and/or management of
[its wholly-owned subsidiary and co-defendant]”). Plaintiffs’ boilerplate allegations of
alter ego liability, asserted generally and as to all defendants, “are too conclusory to
survive a motion to dismiss.” Sandoval, 34 F. Supp. 3d at 1040.
Accordingly, defendant East West Bancorp is hereby DISMISSED from this
action without prejudice.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-06336-CAS(FFMx)

Title

RAE H. LORENZ, ET AL. v. EAST WEST BANCORP, INC. ET AL.

B.

Date

January 14, 2016

Predicate Fraud Claim Against Defendant Charter Investments

The East West defendants argue that because plaintiffs fail sufficiently to plead
with requisite particularity pursuant to Rule 9(b) the underlying fraud claim against
defendant Charter Investments, plaintiffs’ claim against East West for aiding and abetting
the underlying fraud also must fail. See Motion at 14; Richard B. LeVine, Inc. v.
Higashi, 32 Cal. Rptr. 3d 244, 249 (Cal. Ct. App. 2005) (“[A]iding and abetting . . .
liability depends upon the actual commission of a tort.”). As East West rightly notes,
plaintiffs’ underlying claim against Charter for fraud must be pled with particularity
pursuant to Rule 9(b) and accordingly must specify “the time, place, and specific content
of the false representations as well as the identities of the parties to the
misrepresentation.” Schreiber Distrib. Co., 806 F.2d at 1401; See Vess, 317 F.3d at 1106
(“Averments of fraud must be accompanied by ‘the who, what, when, where, and how’ of
the misconduct charged.”) (quoting Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997)).

Upon reviewing the allegations in the complaint, as summarized supra at Part II,
the Court concludes that plaintiffs’ underlying fraud claim against Charter is pled with
requisite particularity such that it “give[s] defendant[] [Charter Investments] notice of
[its] particular misconduct . . . so that [it] can defend against the charge and not just deny
that [it] ha[s] done anything wrong.” Bly-Magee v. California, 236 F.3d 1014, 1019 (9th
Cir. 2001) (internal quotations and citation omitted). Plaintiffs’ complaint alleges that
from “at least October of 2013 continuing through March of 2014,” Charter fraudulently
advertised, on internet domains like CharterInvestmentsInc.com, CharterInvestmentsInc.com, and CharterInvestmentsLLC, that it “offers investors brokered CDs.” Id. ¶ 26.
More specifically, “Charter Investments falsely promised Plaintiffs that it was acting as a
deposit broker and placing their money in certificates of deposit,” and instead, upon
receiving funds from investors, “wire transferred all monies [tendered by plaintiffs for
CD investments] to third party accounts in banking secrecy havens.” Id. The complaint
provides specific dates on which each of the plaintiffs wired specific amounts to
Charter’s East West Bank account for CD investments, and further details the dates and
amounts of Charter’s subsequent transfers of the purported investment funds into alleged
banking secrecy havens. See id. ¶¶ 40-90. Collectively, the fairly detailed assertions in
the complaint provide Charter with sufficient notice of its alleged fraudulent conduct
such that it can defend against the charge. Kearns v. Ford Motor Co., 567 F.3d 1120,
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-06336-CAS(FFMx)

Date

January 14, 2016

Title

RAE H. LORENZ, ET AL. v. EAST WEST BANCORP, INC. ET AL.

1124 (9th Cir. 2009); see also In re Easysaver Rewards Litigation, 737 F. Supp. 2d 1159,
1176-77 (S.D. Cal. 2010) (finding allegations detailing alleged misrepresentations made
on website, accompanied by explanation as to why the alleged statements are false, to
plead fraud with sufficient particularity).
East West next argues that even if plaintiffs’ underlying fraud claim is adequately
pled, plaintiffs’ claim for aiding and abetting fraud fails because East West Bank, as a
commercial bank, does not owe a duty to noncustomers such as plaintiffs. See Motion at
16. This argument misses the mark, however, because as discussed infra, plaintiffs’
claim for aiding and abetting fraud does not rely upon the existence of East West Bank’s
duty to plaintiffs, but rather upon East West’s (1) actual knowledge and (2) substantial
assistance in support of Charter’s alleged fraud, breach of fiduciary duty, and conversion.
See Neilson 290 F. Supp. 2d at 1127 (“Under California law, [a claim of aiding and
abetting an intentional tort] does not require that the aider and abetter owe plaintiff a duty
so long as it knows the primary wrongdoer’s conduct constitutes a breach of duty, and it
substantially assists that breach of duty.”) (citation omitted).
Accordingly, the Court declines to dismiss plaintiffs’ aiding and abetting claims
against East West Bank on the grounds that plaintiffs’ underlying claim against defendant
Charter Investments fails.3
C.

Claims Against East West for Aiding and Abetting Charter’s
Intentional Torts (Fraud, Breach of Fiduciary Duty, and Conversion)

Plaintiffs assert claims for aiding and abetting fraud, aiding and abetting breach of
fiduciary duty, and aiding and abetting conversion against the East West defendants.
Under California law, “[l]iability may . . . be imposed on one who aids and abets the
commission of an intentional tort if the person . . . [1] knows the other's conduct
constitutes a breach of duty and [2] gives substantial assistance or encouragement to the
other to so act.” Saunders v. Superior Court, 27 Cal.App.4th 832, 846 (1994) (emphasis

3

In doing so, the Court need not reach the question of whether plaintiffs’
complaint adequately asserts claims against individual defendants Michael Gurevich,
William Kent, and Samson Emelianov.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-06336-CAS(FFMx)

Date

January 14, 2016

Title

RAE H. LORENZ, ET AL. v. EAST WEST BANCORP, INC. ET AL.

added). In the instant motion, East West argues that plaintiffs have failed sufficiently to
plead (1) that East West had actual knowledge of Charter’s fraudulent scheme, and (2)
have further failed to plead that East West substantially assisted Charter in the execution
of its fraudulent scheme. The Court discusses the merits of these arguments in the
discussion that follows.
1.

Aiding and Abetting Fraud (Plaintiffs’ Sixth Claim)
a.

Actual Knowledge

For purposes of pleading an aiding and abetting fraud claim, substantial assistance
of the underlying fraud “must be pleaded with particularity,” while actual knowledge of
the underlying fraud “may be averred generally.” Allstate Ins. Co. v. Countrywide Fin.
Corp., 824 F. Supp. 2d 1164, 1188 (C.D. Cal. 2011) (citing Fed. R. Civ. Proc. 9(b)
(“Malice, intent, knowledge, and other conditions of a person's mind may be alleged
generally.”)); see also In re First Alliance Mortgage Co., 471 F.3d 977, 993 (9th Cir.
2006) (“Although the California decisions on this subject may not be entirely consistent,
we agree . . . that aiding and abetting liability under California law, as applied by the
California state courts, requires a finding of actual knowledge, [but] not specific intent.”).
Although “this obviates the necessity of pleading detailed facts supporting allegations of
knowledge, it does not relieve a pleader of the burden of alleging the nature of the
knowledge a defendant purportedly possessed.” Neilson, 290 F. Supp. 2d at 1119. When
pleading an aiding and abetting claim, “this must be actual knowledge of the primary
violation.” Id. (emphasis added) (citation omitted). In this case, therefore, plaintiffs must
plead that defendant East West had actual knowledge of Charter’s fraudulent
activity––i.e., of Charter’s (1) online offering of brokered, FDIC-insured CD’s and (2)
Charter’s fraudulent diversion of investors’ funds to third-party accounts in overseas
banking secrecy havens. Upon a review of the pertinent allegations, the Court concludes
that plaintiffs’ complaint sufficiently pleads actual knowledge of Charter’s underlying
fraud.
The complaint states that “[d]efendant East West Bank, as part of its enhanced due
diligence procedures, was required to, and did visit the Charter Investments websites,”
Compl. ¶ 94, and thus knew that “[f]rom at least October of 2013 continuing through
March of 2014” Charter was offering investors brokered CDs, id. ¶ 39. Crucially, the
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-06336-CAS(FFMx)

Date

January 14, 2016

Title

RAE H. LORENZ, ET AL. v. EAST WEST BANCORP, INC. ET AL.

complaint further alleges that “early on[,] while millions of dollars remained in [Charter’s
East West Bank] account, at least the Balboa Branch Manager of East West Bank
determined Charter Investments to be an illegitimate and fraudulent entity.” Id. ¶ 92
(emphasis added). Although it would be insufficient for the complaint merely to allege,
as it does, that “[a]ny investigation of Charter . . . would have set off alarm bells” and that
East West “had concerns about [Charter’s] legitimacy,” the complaint does not limit itself
to such general allegations. Id. ¶ 27, 37 (emphasis added). More specifically, plaintiffs
plead actual knowledge by unequivocally stating that East West Bank “did determine
[that] Charter Investments was a fraudulent scheme, but did not cease doing business
with it,” choosing instead to continue “approv[ing] international wire transfers to the
banking secrecy havens until the account was drained of Plaintiffs’ money.” Id. ¶ 27.
The complaint provides additional details, noting that "at least” the Balboa Branch
Manager of East West Bank (1) “determined that investors were depositing IRA and
normal cash into the single Charter Investments account;" (2) "determined that the
investment money was quickly transferred from the Charter Investments account to third
party accounts in banking secrecy havens" (and not towards certificates of deposit); and
(3) accordingly "suggested freezing the account," to no avail. Id. ¶ 92.
Despite such purported knowledge, East West Bank nonetheless allegedly decided
that “it would simply monitor the account activity” because of “its relationship with [a
certain] High Value customer, wh[o] had stood as a reference with Charter Investments.”
Id. Furthermore, with respect to the investments of at least two plaintiffs, the complaint
states that East West––allegedly “knowing that Charter Investments was a fraudulent
company”––approved Charter’s requested wire transfer of these plaintiffs’ funds even
after East West itself called the plaintiffs’ respective banks to inform them that Charter
was under investigation for fraud.4 Id. ¶¶ 96-97. The Court finds that such allegations

4

The Court rejects East West’s argument that plaintiffs fail adequately to plead
these particular allegations regarding East West’s knowledge of the underlying fraud on
the grounds that the complaint does not “set forth ‘when’ this ‘fraud’ occurred, ‘who’
was involved in the fraudulent act, ‘where’ it took place, or ‘when’ East West Bank
contacted the Plaintiff[s’] bank.” Motion at 13 (citing Vess, 317 F.3d at 1106). In
advancing this argument, East West appears to be arguing that plaintiffs must plead East
West’s alleged knowledge of the underlying fraud with particularity; however, as
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-06336-CAS(FFMx)

Date

January 14, 2016

Title

RAE H. LORENZ, ET AL. v. EAST WEST BANCORP, INC. ET AL.

plead with sufficient particularity that “defendant[] [East West Bank] had actual
knowledge of [the] specific primary violation” committed by Charter. Neilson, 290 F.
Supp. 2d at 1120.
Defendants resist this conclusion, arguing that plaintiffs fail adequately to plead
that East West Bank had actual knowledge of Charter’s fraud under the standard
established by the California Court of Appeals in Casey v. U.S. Bank Nat'l Ass'n, 127
Cal. App. 4th 1138 (2005). See Motion at 19. Defendants argue that the present case is
factually analogous to Casey, wherein the court determined that plaintiff’s claim for
aiding and abetting breach of fiduciary duty (not fraud) failed because plaintiff failed to
plead actual knowledge. See Casey, 127 Cal. App. 4th at 1141. The court in Casey

explained supra, for purposes of pleading an aiding and abetting fraud claim, such
knowledge may be averred generally, and need not be pled with the particularity typically
required by Rule 9(b). Fed. R. Civ. P. 9(b) (“Malice, intent, knowledge, and other
conditions of a person’s mind may be alleged generally.”). Relatedly, the Court also
rejects East West’s argument that because many of plaintiffs’ allegations are based on
“information and belief,” plaintiffs have failed sufficiently to “state the factual basis for
the belief,” as required under Rule 9(b). Motion at 18 (quoting Neubronner v. Milken, 6
F.3d 666, 672 (9th Cir. 1993)). As East West notes, “the general rule that allegations of
fraud based on information and belief do not satisfy Rule 9(b) may be relaxed with
respect to matters within the opposing party's knowledge. In such situations, plaintiffs
can not be expected to have personal knowledge of the relevant facts.” Neubronner, 6
F.3d at 672. Nonetheless, “this exception does not nullify Rule 9(b); a plaintiff who
makes allegations on information and belief must state the factual basis for the belief.”
Id. The Court finds, viewing the complaint in its entirety, that plaintiffs have “satisf[ied]
this relaxed version of Rule 9(b).” Id. The complaint here does more than merely allege
“suspicious circumstances” to support the factual basis for plaintiffs’ allegations of fraud
and aiding and abetting such fraud. Id. Again, with respect to pleading East West’s
actual knowledge of such fraud, such knowledge “may be averred generally” and must
only be supported by “factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Allstate Ins. Co., 824
F. Supp. 2d at 1188 (citation and quotation marks omitted). The Court finds that this
requirement was met here.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-06336-CAS(FFMx)

Date

January 14, 2016

Title

RAE H. LORENZ, ET AL. v. EAST WEST BANCORP, INC. ET AL.

explained that “the banks’ alleged knowledge of the [primary alleged tortfeasor’s]
suspicious account activities—even money laundering—without more, does not give rise
to tort liability for the banks.” Id. at 1151 (emphasis in original). Accordingly, merely
alleging that the banks “knew that the [tortfeasors] were engaged in wrongful or illegal
conduct . . . in breach of their fiduciary duties” does not sufficiently plead that the banks
had actual knowledge that the tortfeasors were misappropriating plaintiff’s funds. Id. at
1152. “On the other hand,” the court explained, “it is equally clear that if the [plaintiff]
can allege the banks knew the [tortfeasors] were stealing corporate funds and knowingly
assisted the [tortfeasors] in laundering this stolen money, those allegations would suffice
to state a claim for aiding and abetting the theft (or breach of fiduciary duty).” Id. at
1151.
In the instant case, the Court finds that plaintiff’s complaint is not appropriately
analogized to the complaint in Casey, wherein the plaintiff failed to plead actual
knowledge with sufficient specificity by “essentially alleg[ing] the banks knew something
fishy was going on with the accounts opened by the [tortfeasors].” Id. at 1149. Rather,
the Court concludes that the instant case is more analogous to others in which the
plaintiff was found to have alleged actual knowledge with sufficient particularity. See,
e.g. Gonzales v. Lloyds TSB Bank, PLC, 532 F. Supp. 2d 1200, 1207 (C.D. Cal. 2006)
(“Because Rule 9(b) provides that ‘malice, intent, knowledge, and other condition of
mind may be averred generally,’ and because Plaintiffs have alleged facts in support of
their allegation of knowledge, the Court finds that Plaintiffs have more than adequately
satisfied Rule 9(b)'s pleading requirements for knowledge.”); Mosier v. Stonefield
Josephson, Inc., No. CV 11-2666 PSG EX, 2011 WL 5075551, at *8 (C.D. Cal. Oct. 25,
2011) (distinguishing Casey and finding that plaintiff adequately pled actual knowledge
of the underlying intentional tort); see also Neilson, 290 F. Supp. 2d at 1121.
b.

Substantial Assistance

In addition to East West’s actual knowledge of the underlying fraud, the Court
finds that the complaint also adequately pleads substantial assistance, stating, inter alia,
that “[East West] played an integral role in [Charter’s] operation and success,” Compl. ¶
27, and “substantially assisted” Charter Investments by “approving and conducting
numerous wire transfers from the Charter Investment accounts at East West Bank to bank
accounts in Banking Secrecy Havens held by unknown entities,” id. ¶ 95, even after “the
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-06336-CAS(FFMx)

Date

January 14, 2016

Title

RAE H. LORENZ, ET AL. v. EAST WEST BANCORP, INC. ET AL.

Balboa Branch Manager determined that Charter Investments [was] an illegitimate and
fraudulent entity,” and in some cases (as explained supra) after East West informed other
banks of the investigation into Charter’s alleged fraud. Id. ¶¶ 93, 96, 97. As the
California Court of Appeals explained in Casey,
[C]ommon sense tells us that even “ordinary business
transactions” a bank performs for a customer can satisfy the
substantial assistance element of an aiding and abetting claim if
the bank actually knew those transactions were assisting the
customer in committing a specific tort. Knowledge is the
crucial element. We thus reject the banks’ challenge to the
sufficiency of the substantial assistance allegations, and focus
instead on whether the [plaintiff] adequately alleged the
knowledge element of the aiding and abetting claim.
Casey, 127 Cal. App. 4th at 1145; see also Mosier, 2011 WL 507551, at *7 (“[E]ven
‘ordinary business transactions can constitute substantial assistance for purposes of
aiding and abetting liability, if the defendant actually knew the transactions were
assisting the tortfeasor in committing a specific tort.”) (citation omitted).
Thus, under the relevant standards established by California law, the Court finds
that plaintiffs have adequately pled both East West’s actual knowledge of Charter’s
fraudulent conduct, as well as East West’s substantial assistance in support thereof. See
Neilson, 290 F. Supp. 2d at 1127. Accordingly, the Court declines to dismiss plaintiff’s
claim against defendant East West Bank for aiding and abetting fraud.
2.

Aiding and Abetting Breach of Fiduciary Duty (Plaintiffs’ Fourth
Claim)

East West argues that plaintiffs’ claim for aiding and abetting breach of fiduciary
duty is “grounded in fraud” and is therefore subject to Rule 9(b)’s heightened pleading
requirements, which, defendants contend, plaintiffs have failed to meet. See Motion at
17. However, the Court finds that even if the aiding and abetting breach of fiduciary duty
claim is grounded in fraud, the complaint meets the heightened pleading requirements of
Rule 9(b); accordingly, the Court declines to dismiss plaintiffs’ fourth claim.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-06336-CAS(FFMx)

Date

January 14, 2016

Title

RAE H. LORENZ, ET AL. v. EAST WEST BANCORP, INC. ET AL.

East West argues that because plaintiffs fail sufficiently to allege that Charter
Investments owed a fiduciary duty to plaintiffs, East West cannot be held liable for aiding
and abetting any alleged breach of fiduciary duty. Motion at 17; Levine, 32 Cal. Rptr. at
250 (“Unless plaintiff’s partners . . . committed the underlying tort alleged here, i.e.,
breach of fiduciary duty, [defendant] cannot be held liable either as a conspirator or as an
aider and abettor.”). In order to plead a cause of action for breach of fiduciary duty,
“there must be shown [1] the existence of a fiduciary relationship, [2] its breach, and [3]
damage proximately caused by that breach.” Pierce v. Lyman, 1 Cal. App. 4th 1093,
1101 (1991). Defendants cite to the California Court of Appeals’ decision in Copesky v.
Superior Court, which states that “well-established authority” in California stands for the
“proposition that the relationship between a bank and its depositor is not a fiduciary
relationship, but that of debtor-creditor.” 229 Cal. App. 3d 678, 693 (1991) (emphasis in
original). In light of such authority, East West asserts that Charter’s relationship to
plaintiffs was not fiduciary in nature but rather “more akin to a ‘bank-depositor’
relationship,” Motion at 18, as the complaint alleges that Charter agreed to place
plaintiffs’ “money in certificates of deposit at FDIC insured banks.” Compl. ¶ 26. Put
simply, East West contends that just as “there would be no fiduciary relationship between
a depositor and a bank where the depositor bought a CD, a purported broker for such a
CD would not owe a fiduciary duty to the depositor.” Motion at 18 (citing Copesky, 229
Cal. App. 3d at 692).
For purposes of the instant motion, the Court disagrees. First, the Court notes that
“[t]he existence of a fiduciary duty is generally a question of fact which cannot be
resolved at the motion to dismiss stage.” Cruz v. United States, 219 F. Supp. 2d 1027,
1039 (Breyer, J.) (N.D. Cal. 2002) (citing Michelson v. Hamada, 29 Cal.App.4th 1566,
1576 (1994)). Generally, a “fiduciary relationship may exist where one party voluntarily
accepts the trust and confidence of another and enjoys a superior position of influence
over the trusting party.” In re Daisy Systems Corp., 97 F.3d 1171, 1178 (9th Cir. 1996).
In the instant case, plaintiffs plead that “Charter had a fiduciary duty to its investors to
invest the money as promised”––i.e., to “act[] as a deposit broker and plac[e] their money
in certificates of deposit at FDIC insured banks,” as promised on Charter’s various
websites. Compl. ¶ ¶ 26, 109. Construing the facts alleged in the complaint in favor of
the non-moving party, the Court finds that plaintiffs adequately plead the existence of a
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-06336-CAS(FFMx)

Date

January 14, 2016

Title

RAE H. LORENZ, ET AL. v. EAST WEST BANCORP, INC. ET AL.

fiduciary relationship. See Houck v. Substitute Trustee Services, Inc., 791 F.3d 473, 484
(4th Cir. 2015) (“To survive a motion to dismiss, a plaintiff need not demonstrate that her
right to relief is probable or that alternative explanations are less likely; rather, she must
merely advance her claim ‘across the line from conceivable to plausible.’”) (quoting
Twombly, 550 U.S. at 570); see also Estate of Migliaccio v. Midland Nat’l. Life Ins. Co.,
436 F. Supp. 2d 1095, 1108 (C.D. Cal. 2006) (finding breach of fiduciary duty where
“defendants trained their sales agents to lure senior citizens into their confidence” by
offering estate and financial planning assistance but then sold them improper annuities).
East West nonetheless contends that even assuming that plaintiffs have adequately
pled a fiduciaryduty, plaintiffs have failed to plead East West’s actual knowledge of the
violation of any such duty. The complaint pleads that “East West Bank knew Charter
Investments had a fiduciary relationship to its investors,” “knew that Charter Investments
breached that fiduciary duty by wire transferring the investors' money to third party,
overseas accounts in banking secrecy havens,” and thus “aided and abetted Charter
Investments by approving and conducting [the] numerous wire transfers totaling 5
million dollars in investor funds.” Compl. ¶¶ 113-114. The Court agrees with East
West’s assertion that such conclusory paragraphs, standing alone, “are bare legal
assertions” which solely “mirror the legal standard for liability,” and by themselves do
not “allow the Court to draw an inference of liability.” Allstate Ins. Co., 824 F. Supp. 2d
at 1189. However, the Court finds that the remainder of the complaint sufficiently
alleges “factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Id. (citation omitted). Specifically, one
could reasonably infer that East West had actual knowledge of a fiduciary duty between
Charter and those plaintiff-investors who called to tell East West that they “w[ere] going
to invest with Charter Investments” and accordingly spoke to representatives of East
West Bank to confirm that Charter maintained a “legitimate” bank account before wiring
their investment funds. See Compl. ¶¶ 41, 45, 75 (regarding the investments of plaintiffs
Cole, Lorenz and Woolbright); see also id. ¶ 92 (alleging that East West’s Balboa Branch
Manager “determined that investors were depositing IRA and normal cash into the single
Charter Investments account”). In light of such allegations, the Court finds that plaintiffs

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-06336-CAS(FFMx)

Date

January 14, 2016

Title

RAE H. LORENZ, ET AL. v. EAST WEST BANCORP, INC. ET AL.

have sufficiently pled East West’s knowledge of a breach of fiduciary duty.5 See
Gonzales, 532 F. Supp. 2d at 1207 (C.D. Cal. 2006) (“As to Defendant's knowledge of
the breach of fiduciary duty, Plaintiffs allege: [‘]The Defendants at all material times had
actual knowledge of the . . . [other parties’] fiduciary duties to Plaintiffs with respect to
Plaintiffs' investments . . . .[and] at all material times knew that . . . [they] were violating
their fiduciary duties to their clients . . . .[’] Plaintiffs have adequately pled the element
of knowledge.”).
3.

Aiding and Abetting Conversion (Plaintiffs’ Second Claim)

The East West defendants argue that plaintiffs’ claim for aiding and abetting
conversion is “grounded in fraud” and is therefore subject to Rule 9(b)’s heightened
pleading requirements, which plaintiffs purportedly fail to meet. See Motion at 19. In
conclusory fashion, the complaint asserts that East West Bank “knew” that plaintiffs’
funds transferred to “Charter’s account” were “for [plaintiffs’] own benefit,” and further
“knew” that Charter “wrongfully interfered with plaintiffs’ right to their money” by wire
transferring such funds to “overseas accounts . . . .” Compl. ¶¶ 104-105. As with the
complaint’s allegations regarding aiding and abetting breach of fiduciary duty, “[t]hese
paragraphs are bare legal assertions” and simply “mirror the legal standard for liability,
but . . . provide no facts, particular or general, which would allow the Court to draw an
inference of liability.” Allstate Ins. Co., 824 F. Supp. 2d at 1189. However, because
plaintiffs’ conversion claim is based upon the same alleged fraudulent transfers of
plaintiffs’ investment money to overseas banking secrecy havens, the Court concludes
that the aiding and abetting conversion claim survives the instant motion for reasons
outlined supra in the Court’s discussion of plaintiffs’ predicate fraud and aiding and
abetting fraud claims.

5

For the same reasons outlined in the Court’s discussion of East West’s alleged
aiding and abetting fraud, the Court also finds that the complaint sufficiently pleads that
East West substantially assisted Charter Investments’ breach of fiduciary duty by
allegedly approving and placing wire transfers to third party overseas banking secrecy
havens.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-06336-CAS(FFMx)

Title

RAE H. LORENZ, ET AL. v. EAST WEST BANCORP, INC. ET AL.

E.

Date

January 14, 2016

Violation of California Business & Professions Code 17200 et seq.
(Plaintiffs’ Seventh Claim)

California Business and Professions Code § 17200, California’s unfair competition
law (the “UCL”), proscribes unfair competition by prohibiting “any unlawful, unfair, or
fraudulent business act or practice and unfair, deceptive, untrue or misleading
advertising.” Cal. Bus. & Prof. Code § 17200. While the UCL “imposes liability only
for a party's ‘personal participation in the unlawful practices[,]’ . . . it is sufficient that the
defendant aided and abetted the principal violator.” Plascencia v. Lending 1st Mortgage,
583 F. Supp. 2d 1090, 1098 (N.D. Cal. 2008) (quoting People v. Toomey, 157
Cal.App.3d 1, 14, 203 Cal.Rptr. 642 (1984)). In the instant motion, East West argues that
(1) because plaintiffs’ section 17200 claim is based on their underlying fraud theory
against Charter, the claim fails to satisfy Rule 9(b) and should be dismissed, see Motion
at 23 (citing In re Google, Inc.Privacy Policy Litig., 58 F. Supp. 3d 968, 984 (N.D. Cal.
2014) (“If the unlawful conduct is part of a uniform course of fraudulent conduct, it must
meet Rule 9(b)’s heightened pleading standards.”)); and (2) because, in East West’s view,
the complaint fails sufficiently to plead “actual knowledge” against East West Bank for
aiding and abetting fraud, breach of fiduciary duty, or conversion, the UCL claim
necessarily also fails on this ground.
These arguments fail, however, as the Court has concluded that plaintiffs have
adequately pled their underlying fraud claim against Charter, and further have adequately
pled East West’s actual knowledge of Charter’s alleged tortious conduct. See supra.
Accordingly, the Court finds that plaintiffs have adequately pled their UCL claim against
defendant East West Bank.
V.

CONCLUSION

In accordance with the foregoing, the Court DENIES defendants’ motion to
dismiss the claims asserted against defendant East West Bank. The Court GRANTS,
without prejudice, defendants’ motion to dismiss all claims asserted against defendant
East West Bancorp, Inc., as plaintiffs’ have failed sufficiently to plead alter ago liability.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:15-cv-06336-CAS(FFMx)

Date

January 14, 2016

Title

RAE H. LORENZ, ET AL. v. EAST WEST BANCORP, INC. ET AL.

Plaintiffs shall have until and including Monday, February 8, 2016 to file a first
amended complaint addressing the deficiencies identified herein. Failure to do so may
result in dismissal of defendant East West Bancorp, Inc. with prejudice.
IT IS SO ORDERED.
00
Initials of Preparer

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:

00

CMJ

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