Kozlowski et al v. Stroomberg et al

Filing 46

ORDER signed by Judge John A. Mendez on 8/21/13 ORDERING the Defendant's Motion for Judgment on the Pleadings is GRANTED. All claims against her are dismissed. Plaintiffs are granted leave to amend their complaint within 20 days. Defendant is ordered to file a responsive pleading within 20 days of any amended complaint that contains claims against her, but if no such complaint is filed then she is dismissed from this lawsuit. (Becknal, R)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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MARCO KOZLOWSKI, et al.,

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Plaintiffs,

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No.

2:13-cv-00291-JAM-DAD

ORDER GRANTING DEFENDANT TRACI
SOUTHWELL’S MOTION TO DISMISS

v.

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HUIB STROOMBERG, et al.,

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Defendants.

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Presently before the Court is Defendant Traci Southwell’s

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(“Defendant”) Motion to Dismiss Pursuant to Rule 12(c) (Doc.

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##29-30).

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Egbeyemi, the Kozlowski/Wakeman/Egbeyemi Partnership, and Luxury

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Home Solutions, Inc. (collectively “Plaintiffs”) filed a Response

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(Doc. #40) and a Statement of Disputed Facts (Doc. #41) in

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opposition to Defendant’s motion. 1

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Plaintiffs Marco Kozlowski, Brad Wakeman, Kadri A.

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This motion was determined to be suitable for decision without
oral argument. E.D. Cal. L.R. 230(g). The hearing was
originally scheduled for July 24, 2013.
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I.

BACKGROUND

This action arises out of Plaintiffs’ allegations that co-

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defendant Stroomwell Investment Group, Inc. (“Stroomwell”),

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acting through its agent and additional co-defendant Mihai Algiu

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(“Algiu”), committed fraud when selling Plaintiffs a piece of

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property located in Cerbere, France (the “Cerbere Property”).

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Plaintiffs allege that Algiu misrepresented the condition of the

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property in making the sale.

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property was represented as unfinished when they agreed to buy

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it, but they allege that Algiu promised that the construction

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would be completed by June 1, 2011.

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funds totalling $258,630.24 as a down payment on February 10 and

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14, 2011.

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was never completed.

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represented himself as a sales agent of co-defendant Stroomwell

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throughout the sale process.

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Plaintiffs concede that the

Plaintiffs allegedly sent

Plaintiffs allege that construction on the property
Plaintiffs also allege that Algiu

Plaintiffs contend that Algiu, allegedly acting on behalf of

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Defendant and co-defendants Huib Stroomberg, George Stroomberg,

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Angelic Stroomberg, Dick Stroomberg, Riemke Koolen, and

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Stroomwell attempted to extend the time for completion several

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times and add new terms to the sales agreement after the down

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payment was made, but Plaintiffs refused to add additional terms

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to the agreement.

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return of their deposit.

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31, 2012 to refund the deposit and threatened to sue to obtain

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specific performance of the sales contract.

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filed the present lawsuit.

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In Spring of 2012, Plaintiffs demanded a
Defendants allegedly refused on July

Plaintiffs then

Plaintiffs also allege that all defendants engaged in an
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ongoing conspiracy to commit fraud.

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based on a 2009 case filed before this Court, Case No. 2:09-CV-

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00625-JAM-DAD (the “Minne/Lohman case”), wherein plaintiffs Edith

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Minne and Bonnie Lohman alleged that Defendant along with other

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co-conspirators misrepresented the state of the Cerbere property

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in order to elicit investment funds from them, funds Defendant

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allegedly conspired to convert to her own use.

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voluntarily dismissed by the plaintiffs subject to a stipulation

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under which Defendant and her alleged co-conspirators were to

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Plaintiffs’ allegations are

That case was

complete and/or sell the Cerbere property.

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For the purposes of the claims against Defendant, Plaintiffs

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do not allege any particular action taken by Defendant in this

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case.

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CEO and Secretary of co-defendant Stroomwell.

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They only allege that she was at all relevant times the

In this suit, Plaintiffs bring the following claims:

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1) Civil Racketeer Influenced and Corrupt Organizations (“RICO”),

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18 U.S.C. § 1962(c); 2) Fraud; 3) Unlawful, Deceptive, and Unfair

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Business Practices, Cal. Bus. & Prof. Code § 17200, et seq.;

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4) Unfair, Deceptive and Misleading Advertising, Cal. Bus. &

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Prof. Code § 17500; 5) Breach of Fiduciary Duty; 6) Aiding and

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Abetting Breach of Fiduciary Duty; and 7) Unjust Enrichment and

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Imposition of Constructive Trust.

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over Plaintiffs’ federal civil RICO claim pursuant to 28 U.S.C. §

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1331 and Plaintiffs’ related state claims pursuant to 28 U.S.C. §

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1367.

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The Court has jurisdiction

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II.

OPINION

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A.

Legal Standard

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“A judgment on the pleadings is properly granted when,

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taking all the allegations in the non-moving party’s pleadings as

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true, the moving party is entitled to judgment as a matter of

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law.”

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2010) (citations omitted).

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allegations of the non-moving party must be accepted as true,

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while the allegations of the moving party which have been denied

Ventress v. Japan Airlines, 603 F.3d 676, 681 (9th Cir.
“For purposes of the motion, the

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are assumed to be false.”

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Feiner & Co., 896 F.2d 1542, 1550 (9th Cir. 1989).

Hal Roach Studios, Inc. v. Richard

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A Rule 12(c) motion for judgment on the pleadings is the

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functional equivalent of a Rule 12(b)(6) motion, and the same

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legal standard applies to both.

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v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1054 n.4 (9th Cir.

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2011).

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the allegations in the complaint as true and draw all reasonable

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inferences in favor of the plaintiff.

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U.S. 232, 236 (1974), overruled on other grounds by Davis v.

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Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322

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(1972).

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are not entitled to the assumption of truth.

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556 U.S. 662, 678 (2009) (citing Bell Atlantic Corp. v. Twombly,

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550 U.S. 544, 555 (2007)).

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plaintiff needs to plead “enough facts to state a claim to relief

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that is plausible on its face.”

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Judgment is appropriate where the plaintiff fails to state a

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claim supportable by a cognizable legal theory.

Cafasso, United States ex rel.

In considering a Rule 12(c) motion, the Court must accept

Scheuer v. Rhodes, 416

Assertions that are mere “legal conclusions,” however,
Ashcroft v. Iqbal,

To survive a Rule 12(c) motion, a

Twombly, 550 U.S. at 570.

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Balistreri v.

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Pacifica Police Department, 901 F.2d 696, 699 (9th Cir. 1990).
In considering a motion under Rule 12(c), a court must

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generally limit its review to the pleadings themselves.

Hal

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Roach Studios, 896 F.2d at 1542.

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the complaint and incorporated by reference are treated as part

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of the complaint, not extrinsic evidence” and, thus, may be

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considered in a Rule 12(c) motion.

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L.A., CA, 530 F. Supp. 2d 1084, 1096 (C.D. Cal. 2008) (citing

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Voest-Alpine Trading USA Corp. v. Bank of China, 142 F.3d 887,

However, “documents attached to

Summit Media LLC v. City of

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891 n.4 (5th Cir. 1998)).

Extrinsic evidence that is subject to

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judicial notice may be properly considered in a Rule 12(c)

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motion.

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981 n.18 (9th Cir. 1999).

Heliotrope Gen., Inc. v. Ford Motor Co., 189 F.3d 971,

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B.

Discussion

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Plaintiffs generally respond to Defendant’s motion by

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arguing that they failed to comply with the local rules

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applicable to motions for summary judgment.

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however, is made under Federal Rule of Civil Procedure 12(c),

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which is only converted to a motion for summary judgment if the

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Court bases its decision on materials outside of the pleadings.

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The following analysis is limited to the pleadings, so the local

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rules related to motions for summary judgment do not apply.

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1.

This motion,

Defendant’s Vicarious Liability

Defendant moves for judgment on the pleadings by arguing

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that Plaintiffs’ complaint does not meet the pleading standard

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for fraud, that Defendant is immune from liability under the

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facts alleged under the agent-immunity rule and the shareholder

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immunity rule, and that the allegations in the complaint are
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internally inconsistent to the point that they are facially

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false.

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Defendant took any action personally, so her personal liability

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can only arise from a vicarious liability theory such as through

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conspiracy liability.

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regarding personal liability pursuant to the agent and

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shareholder immunity rules are potentially dispositive and they

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are addressed first.

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Plaintiffs do not allege in their complaint that

a.

For this reason, Defendant’s arguments

The Agent Immunity Rule

In support of her motion, Defendant argues that the agent

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immunity rule precludes her individual liability based on the

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allegations in Plaintiffs’ complaint.

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is not liable for the actions of Stroomwell or the other

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defendants because there is no allegation that she was acting

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outside the scope of her duties to Stroomwell.

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respond by arguing that they have alleged and documented

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Defendant’s fraudulent actions in the complaint and its exhibits.

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Defendant argues that she

Plaintiffs

“Agents and employees of a corporation cannot conspire with

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their corporate principal or employer where they act in their

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official capacities on behalf of the corporation and not as

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individuals for their individual advantage.”

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Corp. v. Litton Saudi Arabia Ltd., 7 Cal. 4th 503, 525 (1994)

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(quoting Wise v. S. Pac. Co., 35 Cal. Rptr. 652, 665 (Ct. App.

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1963) and overruling it on other grounds).

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is no allegation that Defendant took any particular action at all

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beyond being an officer of Stroomwell.

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basis to find that she acted outside of her official capacity to

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her own advantage.

Applied Equip.

In this case, there

There is accordingly no

The agent immunity rule therefore precludes
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Defendant’s liability.

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b.

Shareholder Liability

Defendant next argues that she cannot be liable as a

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shareholder for Stroomwell because the allegations do not support

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shareholder liability in this case.

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the complaint and its exhibits support individual liability for

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Defendant.

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Plaintiffs again argue that

The alter ego doctrine arises when a plaintiff comes
into court claiming that an opposing party is using
the corporate form unjustly and in derogation of the
plaintiff’s interests. In certain circumstances the
court will disregard the corporate entity and will
hold the individual shareholders liable for the
actions of the corporation.

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Cambridge Elecs. Corp. v. MGA Elecs., Inc., 227 F.R.D. 313, 325

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(C.D. Cal. 2004) (quoting Mesler v. Bragg Management Co., 39

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Cal.3d 290, 300 (1985)).

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that allows a shareholder of a corporation to be held liable for

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a corporation’s actions, abrogating the usual rule of shareholder

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immunity.

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The alter ego doctrine is one of equity

Id.

Before the doctrine may be invoked, two elements must
be established: ‘(1) that there be such unity of
interest and ownership that the separate personalities
of the corporation and the individual no longer exist
and (2) that, if the acts are treated as those of the
corporation alone, an inequitable result will follow.’

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Id. (quoting Mesler, 39 Cal. 3d at 300).
In this case, neither the complaint nor the attached

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exhibits contain any allegations to support a finding that

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Defendant and Stroomwell disregarded the corporate formalities

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such that Defendant can be held individually liable in her

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capacity as shareholder for Stroomwell’s actions.

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therefore not liable as a shareholder of Stroomwell as a matter
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Defendant is

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of law.
The complaint does not contain allegations related to

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Defendant’s individual conduct, and the allegations are also

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insufficient to support a finding that she is vicariously liable

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for the actions of the other defendants in this case.

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is accordingly entitled to judgment on the pleadings and her

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motion is granted.

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2.

Defendant

Particularity of Pleading

Defendant argues that Plaintiffs claims, insofar as they

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sound in fraud, can be dismissed because the complaint does not

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satisfy the fraud pleading standard in Federal Rule of Civil

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Procedure 9(b).

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applies to Plaintiffs’ California Business and Professions Code

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§§ 17200 and 17500 because they also sound in fraud.

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generally respond that the complaint and its exhibits meet the

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fraud pleading standard.

Defendant also argues that heightened pleading

Plaintiffs

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“The elements of a cause of action for fraud in California

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are: ‘(a) misrepresentation (false representation, concealment,

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or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c)

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intent to defraud, i.e., to induce reliance; (d) justifiable

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reliance; and (e) resulting damage.’”

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567 F.3d 1120, 1126 (9th Cir. 2009) (quoting Engalla v.

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Permanente Med. Group, Inc., 15 Cal.4th 951, 974 (1997)).

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the heightened pleading standard in the federal rules, a

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plaintiff must also allege the specific circumstances

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constituting fraud such that the defendant has notice of the

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actual misconduct.

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accompanied by the who, what, when, where, and how of the

Id. at 1124.

Kearns v. Ford Motor Co.,

Under

“Averments of fraud must be

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misconduct charged.”

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317 F.3d 1097, 1106 (9th Cir. 2003)).

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relies on “a unified fraudulent course of conduct,” allegations

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supporting that cause of action must meet the heightened federal

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pleading standard.

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Id. (quoting Vess v. Ciba-Geigy Corp. USA,
Where a cause of action

Kearns, 567 F.3d at 1127.

As discussed previously, the complaint contains no

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allegations particular to Defendant’s actions, and Plaintiffs’

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claims do not satisfy the heightened fraud pleading standard as a

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result.

Plaintiffs’ claims are all based on a single alleged

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fraudulent real estate investment scheme, meaning that all of

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their claims against Defendant are inadequate.

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motion to dismiss is therefore granted for this reason well.

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3.

Defendant’s

Fiduciary Duty

Defendant argues that the Fifth and Sixth causes of action

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are insufficiently pled because there is no basis for finding an

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agency relationship between Defendant and Plaintiffs and

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therefore no basis for finding the existence of a fiduciary duty

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to Plaintiffs from Defendant.

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allegations supporting an agency relationship between co-

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defendant Algiu and co-defendant Stroomwell.

Plaintiffs respond by pointing to

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A defendant is only liable for breach of fiduciary duty

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under California law if it owed a duty of care to the plaintiff.

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Maganallez v. Hilltop Lending Corp., 505 F. Supp. 2d 594, 608

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(N.D. Cal. 2007) (citing McCollum v. Friendly Hills Travel Ctr.,

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217 Cal. Rptr. 919, 923 (Ct. App. 1985)).

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to its principal and must act in the interest of the principal .

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. . .”

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“An agent owes a duty

Id.

In this case, Plaintiffs’ complaint and their argument in
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opposition to this motion are clearly anchored in the theory that

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Algiu was an agent for Stroomwell, not Plaintiffs.

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absence of an agency relationship between Defendant and

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Plaintiffs, either directly or through Algiu and Stroomwell,

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Plaintiffs’ Fifth and Sixth causes of action are legally

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insufficient.

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therefore granted.

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4.

In the

Defendant’s motion to dismiss these claims is

Unjust Enrichment

Finally, Defendant argues that Plaintiffs’ last claim for

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relief for Unjust Enrichment and Constructive Trust must be

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dismissed because unjust enrichment is an equitable remedy and a

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constructive trust is the vehicle through which the remedy

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proceeds, but they are not a standalone cause of action.

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Plaintiffs respond generally that they are entitled to

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restitution based on the allegations in the complaint.

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“Unjust enrichment is not a cause of action . . . or even a

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remedy, but rather a general principle, underlying various legal

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doctrines and remedies . . . .

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restitution.”

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(Ct. App. 2004).

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It is synonymous with

McBride v. Boughton, 20 Cal. Rptr. 3d 115, 121

Plaintiffs’ complaint contains a cause of action for unjust

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enrichment, which is improper.

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also seeks restitution, unjust enrichment’s equivalent.

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Plaintiffs’ cause of action is dismissed with prejudice because

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it is duplicative of Plaintiffs’ requested relief.

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5.

Plaintiffs’ prayer for relief

Leave to Amend

Like a motion made pursuant to 12(b)(6), a district court
may in its discretion grant a motion for judgment on the
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pleadings with leave to amend.

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F. Supp. 2d 942, 945 (C.D. Cal. 2004).

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certain, as required by the Rule 12(c) standard, that Plaintiffs

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are unable to prove any set of facts sufficient to hold Defendant

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personally liable for the fraudulent scheme alleged in

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Plaintiffs’ complaint.

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with leave to amend is therefore appropriate.

Lonberg v. City of Riverside, 300
In this case, it is not

Dismissal of the claims against Defendant

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III. ORDER
Defendant’s Motion for Judgment on the Pleadings is GRANTED.

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All claims against her are dismissed.

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leave to amend their complaint within 20 days.

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ordered to file a responsive pleading within 20 days of any

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amended complaint that contains claims against her, but if no

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such complaint is filed then she is dismissed from this lawsuit.

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Dated: August 21, 2013

Defendant is

IT IS SO ORDERED.

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Plaintiffs are granted

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____________________________
JOHN A. MENDEZ,
UNITED STATES DISTRICT JUDGE

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