Johnson v. Johnson
Filing
54
ORDER DENYING Plaintiff's 49 Motion for Reconsideration of Motion to Dismiss, signed by Magistrate Judge Michael J. Seng on 11/16/2016. (Kusamura, W)
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IN THE UNITED STATES DISTRICT COURT
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FOR THE EASTERN DISTRICT OF CALIFORNIA
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EDWARD J. JOHNSON,
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v.
GERALD JOHNSON,
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1:15-cv-01793 MJS
Plaintiff, ORDER DENYING PLAINTIFF'S MOTION
FOR RECONSIDERATION OF MOTION TO
DISMISS
(ECF No. 49)
Defendant. AMENDED COMPLAINT DUE: January 27,
2017
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I.
Introduction
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Before the Court is Plaintiff Edward Johnson’s Motion for Reconsideration of the
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Court's Order granting Defendant’s motion to dismiss in part and limiting Plaintiff’s RICO
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claim to post-bankruptcy discharge conduct. (ECF No. 48.) Defendant Gerald Johnson
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opposed the motion on November 2, 2016, and Plaintiff filed a reply on November 10,
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2016. (ECF Nos. 51-52.) Having found the matter appropriate for submission upon the
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record and briefs (See Local Rule 230(g)), and having carefully considered the parties'
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briefs, Plaintiff’s Motion for Reconsideration is DENIED.
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II.
Background
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A.
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The Court set forth the relevant facts in its order on the motion to dismiss. Those
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Factual Background
facts remain unchanged.
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Plaintiff originally sought damages from Defendant for contribution, promissory
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estoppel, and unjust enrichment resulting from an alleged breach of, and wrongful
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disassociation from, a real estate investment partnership.
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On August 2, 2016, Plaintiff filed an additional claim for civil RICO 1 as a
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counterclaim in reply. (ECF No. 42.) The claim alleged that Defendant engaged in a
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pattern of criminal activity including acts of tax, real estate, and bankruptcy fraud that
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resulted in harm to Plaintiff. Defendant and his wife had jointly filed for Chapter 7
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bankruptcy protection in the Bankruptcy Court for the Eastern District of Pennsylvania in
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2012, and obtained discharge in May 2013. Plaintiff’s RICO claim was based, in
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significant part, on Defendant’s alleged pre-discharge criminal activity.
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Defendant moved to dismiss the counterclaim in reply arguing that Plaintiff was
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barred from seeking damages for events occurring prior to bankruptcy discharge. (ECF
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No. 43.) The Court agreed and granted the motion. (ECF No. 48.) Plaintiff filed the
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instant motion for reconsideration challenging the Court’s order. (ECF No. 49.)
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B.
The Parties' Arguments
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Plaintiff seeks review of the Court’s order on the motion to dismiss. He argues
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that bankruptcy and RICO laws are in tension, and that by preventing Plaintiff from
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reviewing Defendant’s pre-discharge conduct to establish a pattern of racketeering
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activity, the Court did not provide RICO law sufficient deference. It appears, but is still
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uncertain, that Plaintiff acknowledges that he is not able to base claims on pre-discharge
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conduct, and only seeks to review pre-discharge conduct to show a pattern of
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RICO refers to the Racketeer Influenced and Corrupt Organizations Act (“RICO”). 18 U.S.C. §§
1961 et seq.
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racketeering activity. 2 Defendant contends that the motion to dismiss was rightfully
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decided, and Plaintiff has not met the heavy burden required for granting a motion for
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reconsideration.
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III.
Discussion
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A.
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Eastern District Local Rule 230(j) requires that a party moving for reconsideration
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show "what new or different facts or circumstances are claimed to exist which did not
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exist or were not shown upon such prior motion, or what other grounds exist for the
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motion, and why the fact or circumstances were not shown at the time of the prior
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Legal Standard
motion." E.D. Cal. L.R. 230(j).
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To prevail on a motion for reconsideration, "a party must set forth facts or law of a
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strongly convincing nature to induce the court to reverse its prior decision." Hansen v.
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Schubert, 459 F.Supp.2d 973, 998 (E.D. Cal. 2006). "A motion for reconsideration
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should not be granted, absent highly unusual circumstances, unless the district court is
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presented with newly discovered evidence, committed clear error, or if there is an
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intervening change in the controlling law," Marlyn Nutraceuticals, Inc. v. Mucos Pharma
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GmbH & Co., 571 F.3d 873, 880 (9th Cir. 2009) (internal quotation marks and citations
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omitted) "A party seeking reconsideration must show more than a disagreement with the
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Court's decision, and recapitulation of the cases and argument considered by the court
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before rendering its original decision fails to carry the moving party's burden." United
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States v. Westlands Water Dist., 134 F.Supp.2d 1111, 1131 (E.D. Cal. 2006) (internal
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citations omitted).
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B.
Analysis
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Plaintiff has not presented any new law or evidence that indicate that the Court
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committed clear error. While Plaintiff may disagree with the Court’s decision to prevent
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Plaintiff still seeks to recover damages based on pre-discharge conduct: “Plaintiff does not
abandon the argument that pre-discharge debts could overlap RICO injuries and be recoverable in a RICO
claim, and does not waive any such damages.” (Mot. at 12, ECF No. 50.)
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review of Defendant’s pre-discharge conduct, the decision was purposeful on the part of
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the Court. 11 U.S.C. § 524(a) provides that bankruptcy discharge acts as an injunction to
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broadly prevent not just legal proceedings, but any other acts to collect discharged debts
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including “all forms of collection activity.” 4-524 Collier on Bankruptcy § 524.02. Plaintiff’s
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attempt to conduct discovery and base his RICO claim on pre-discharge activity is in
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direct violation of the principles of bankruptcy intending to provide the debtor an
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unencumbered fresh start. Kokoszka v. Belford, 417 U.S. 642, 647 (1974); Walls v.
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Wells Fargo Bank, N.A., 276 F.3d 502, 509 (9th Cir. 2002).
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Unlike Plaintiff, the Court sees no inherent tension between bankruptcy and RICO
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laws. It is clear that the government may reach back and review pre-discharge conduct
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in a criminal RICO prosecution. However, as explained in the order on the motion to
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dismiss, Plaintiff’s civil claim under RICO was not excepted from discharge, nor did
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Plaintiff seek to revoke the discharge within the relevant period. The discharge therefore
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remains in effect with regard to the debt in question, even if procured by fraud. Allowing
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a claim, based in part on Defendant’s pre-discharge conduct, would undermine the
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purpose of bankruptcy protections.
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Plaintiff, in his motion for reconsideration, presents essentially the same
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arguments set forth in the motion to dismiss. The only additional case mentioned by
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Plaintiff, Cadle Co. v. Flanagan, 271 F. Supp. 2d 379 (D. Conn. 2003), does not
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persuade the Court that its reasoning was incorrect, let alone clearly erroneous. In
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Cadle, the court allowed a civil RICO claim to proceed based on bankruptcy fraud.
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However, in Cadle, the defendant debtor had yet to obtain discharge. Therefore there is
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no evidence that the Court allowed such claim despite a bankruptcy discharge order.
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Having allowed Defendant to obtain a discharge, and failing to challenge the propriety of
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the discharge, Plaintiff is in a fundamentally different position than the plaintiffs in Cadle.
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The Court’s order that “Plaintiff may not pursue any claims for damages against
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Defendant arising from pre-discharge conduct” stands. This ruling does not determine
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whether evidence of pre-discharge activities may or may not be introduced to establish a
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pattern of racketeering activity; that issue is not before the Court at this time. However,
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in no event will Plaintiff be permitted to seek to recover damages from those pre-
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discharge activities. In this regard, it is noted, as it was in the order on the motion to
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dismiss, that the factual basis for Plaintiff’s RICO claim focused almost exclusively on
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Defendant’s actions in connection with the real estate investment partnership and
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bankruptcy proceedings. The only alleged criminal act occurring post-discharge was tax
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fraud. (See, e.g., ECF No. 42 at ¶ 113.) Those claims of tax fraud previously were found
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to lack particularity, and the Court granted Defendant’s motion for a more definite
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statement.
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With regard to attempts to produce evidence of a pattern of racketeering activity,
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the Supreme Court has held that a plaintiff “must show that the racketeering predicates
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are related, and that they amount to or pose a threat of continued criminal activity.” H.J.,
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Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 239 (1989). Thus, if Plaintiff is
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permitted to proceed on such claims, he will be required to plead and show the relation
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of pre-discharge activity to defendant’s alleged post-discharge tax fraud, that is, how the
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past predicates posed a continued threat. Plaintiff also “must demonstrate that the
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racketeering activity proximately caused the loss.” Guerrero v. Gates, 442 F.3d 697, 707
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(9th Cir. 2006) (citing Chaset v. Fleer/Skybox Int’l, 300 F.3d 1083, 1087 (9th Cir. 2002)).
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Thus, in addition to providing further factual detail to support such a claim if he wishes to
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proceed with it, Plaintiff must show how Defendant’s alleged tax fraud or other post-
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discharge criminal acts caused Plaintiff injury.
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In conclusion, the argument presented in the motion simply restates the argument
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presented in the underlying motion, and does not show that the Court committed clear
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error. See Marlyn Nutraceuticals, Inc., 571 F.3d at 880. Accordingly, Plaintiff’s motion for
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reconsideration is denied. To the extent that Plaintiff desires further review he may seek
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interlocutory appeal. 28 U.S.C. 1292(b). And to the extent that Defendant considers
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Plaintiff’s actions in this case to be in violation of the injunction created by the discharge
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order, he can move the bankruptcy court for an order of contempt to enforce the
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discharge order. See Barrientos v. Wells Fargo Bank, N.A., 633 F.3d 1186 (9th Cir.
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2011); 4-524 Collier on Bankruptcy § 524.02(2)(c).
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Finally, Plaintiff contends that his due process rights were violated by the failure of
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the Court to hold oral argument on the motion or allow Plaintiff further briefing to address
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the arguments and legal authority presented in the order. The Federal Rules of Civil
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Procedure and the Local Rules for the Eastern District of California do not require
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litigants to have the opportunity to orally present argument. Fed. R. Civ. P. 78(b) (“By
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rule or order, the court may provide for submitting and determining motions on briefs,
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without oral hearing.”); Local Rule 230(g). The Court determined that oral argument
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would not have been helpful in determining the merits of motion to dismiss, nor does it
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find oral argument necessary to determine this motion for reconsideration. Had the Court
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decided the case on completely different grounds than presented in the briefs, further
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briefing or argument might be appropriate. Here, the Court only cited to legal authority
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and case law directly relevant to the arguments presented in the parties’ briefs. The
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parties were provided sufficient opportunity to argue the merits of their positions in their
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briefs. The fact that the parties did not raise relevant legal authority in their briefs does
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not obligate the Court to provide the parties additional opportunity to present argument.
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Moreover, Plaintiff, in presenting his new arguments in his motion for consideration, only
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confirms that the Court would not have benefited from oral argument or further briefing.
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IV.
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Conclusion
For the reasons discussed herein, Plaintiff’s Motion for Reconsideration is
DENIED. Plaintiff’s amended complaint is due on or before January 27, 2017.
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IT IS SO ORDERED.
Dated:
November 16, 2016
/s/
Michael J. Seng
UNITED STATES MAGISTRATE JUDGE
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