Kozlowski et al v. Stroomberg et al

Filing 64

ORDER signed by Judge John A. Mendez on 3/27/2014 ORDERING that Plaintiff's 60 Motion to Reconsider is DENIED. (Zignago, K.)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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MARCO KOZLOWSKI, BRAD
WAKEMAN, and KADRI A.
EGBEYEMI, the
KOZLOWSKI/WAKEMAN/EGBEYEMI
PARTNERSHIP and LUXURY HOME
SOLUTIONS, INC.,

No.

2:13-cv-00291-JAM-DAD

ORDER DENYING PLAINTIFFS’ MOTION
TO ALTER OR AMEND THE JUDGMENT

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Plaintiffs,
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v.
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HUIB STROOMBERG, TRACI
SOUTHWELL, STROOMWELL
INVESTMENT GROUP, INC.,
GEORGE STROOMBERG, ANGELIC
STROOMBERG, DICK STROOMBERG,
RIEMKE KOOLEN, MIHAI ALGIU,
and DOES 1-100,

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Defendants.
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This matter is before the Court on Plaintiffs Marco

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Kozlowski, Brad Wakeman, Kadri Egbeyemi, the

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Kozlowski/Wakeman/Egbeyemi Partnership and Luxury Home Solutions,

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Inc.’s (collectively “Plaintiffs”) Motion to Alter or Amend (Doc.

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#60) the Court’s December 30, 2013 Order (Doc. #59) granting,

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without leave to amend, Defendant Traci Southwell’s (“Defendant

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Southwell”) Motion to Dismiss (Doc. #53) Plaintiffs’ First
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Amended Complaint (“FAC”) (Doc. #47).

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opposes Plaintiffs’ motion (Doc. #61). 1

Defendant Southwell

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I.

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FACTUAL AND PROCEDURAL BACKGROUND

The factual background of this case is described thoroughly

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in the Court’s initial Order (Doc. #59).

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of reference, a brief summary is included here.

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Nevertheless, for ease

This action arises out of Plaintiffs’ allegations that codefendant Stroomwell Investment Group, Inc. (“Stroomwell, Inc.”),

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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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lawsuit on February 15, 2013.

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Plaintiffs filed the present

Plaintiffs’ original complaint against Defendant Southwell

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was dismissed with leave to amend because it failed to allege any

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individual action by Defendant Southwell, and Defendant

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Southwell’s position as CEO and Secretary of Stroomwell, Inc. did

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not support any theories of vicarious liability (Doc. #46).

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the FAC, Plaintiffs allege that Defendant Southwell

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“participated” in the following three ways:

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21, 2008, Defendant Southwell, along with Defendant Huib

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Stroomberg and on behalf of Stroomwell, Inc., “placed onto the

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Internet a personal invitation and advertisement . . . directed

In

First, on February

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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
scheduled for March 5, 2014.
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to current and potential investors to attend the company’s

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‘Second Annual Presentation on Investment Opportunities.’”

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¶¶ 31-35.

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quoted in a newspaper article with regard to a separate case

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against Defendants by different Plaintiffs.

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Third, Defendant Southwell was copied on emails from Algiu to

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Plaintiffs regarding the Cerbere Property.

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FAC

Second, on March 8, 2009, Defendant Southwell was

FAC ¶¶ 38-41.

FAC ¶¶ 43-52.

The FAC includes the following causes of action against
Defendant Southwell: 1) Civil Racketeer Influenced and Corrupt

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Organizations (“RICO”), 18 U.S.C. § 1962(c); 2) Fraud;

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3) Unlawful, Deceptive and Unfair Business Practices, Cal. Bus. &

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Prof. Code § 17200; and 4) Unfair, Deceptive and Misleading

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Advertising, Cal. Bus. & Prof. Code § 17500.

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II.

OPINION

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A.

Legal Standard

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Although Rule 59(e) of the Federal Rules of Civil Procedure

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(“FRCP”) “permits a district court to reconsider and amend a

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previous order, the rule offers an ‘extraordinary remedy, to be

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used sparingly in the interests of finality and conservation of

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judicial resources.’”

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Bishop, 229 F.3d 877, 890 (9th Cir. 2000) (quoting 12 James Wm.

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Moore et al., Moore's Federal Practice § 59.30[4] (3d ed. 2000)).

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Indeed, a motion for reconsideration should not be granted,

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absent highly unusual circumstances, unless “the district court

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(1) is presented with newly discovered evidence, (2) committed

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clear error or the initial decision was manifestly unjust, or

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(3) if there is an intervening change in controlling law.”

Kona Enterprises, Inc. v. Estate of

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Sch.

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Dist. No. 1J, Multnomah Cnty., Or. v. ACandS, Inc., 5 F.3d 1255,

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1263 (9th Cir. 1993).

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raise arguments or present evidence for the first time when they

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could reasonably have been raised earlier in the litigation.”

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Kona, 229 F.3d at 890 (emphasis in original).

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B.

A Rule 59(e) motion “may not be used to

Discussion
1.

Fraud
a.

California Business Professions Code

Plaintiffs argue that the Court misinterpreted the

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California Business and Professions Code (“B&P”), erroneously

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creating a “private seller” exception to the law.

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its original Order, the Court found that “the licensing

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requirement of B&P section 10139 does not apply to Defendant,”

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because “Defendant appears to be a private seller rather than a

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‘real estate broker’ under B&P section 10131.”

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Mot. at 4.

In

Order at 10.

Under B&P section 10139, all California real estate brokers

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must be licensed.

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“real estate broker” as

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In relevant part, B&P section 10131 defines a

a person who, for a compensation or in expectation of
a compensation . . . does or negotiates to do one or
more of the following acts for another or others:
(a) [s]ells or offers to sell, buys or offers to buy,
solicits prospective sellers or purchasers of,
solicits or obtains listings of, or negotiates the
purchase, sale or exchange of real property or a
business opportunity . . .

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Accordingly, the B&P licensing requirement does not apply to an

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individual who is selling her own property.

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requirement only applies to an individual who does not own the

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property that she is selling.

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Order, “Defendant appears to be a private seller” – that is,

The licensing

As noted by the Court in its

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Defendant Southwell did not appear to be selling the Cerbere

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Property on behalf of a third party.

Order at 10.

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Both in their opposition to the motion to dismiss and in

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this motion to reconsider, Plaintiffs fail to cite a specific

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allegation that Defendant Southwell did not own the Cerbere

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Property.

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exist, but merely that Plaintiffs have failed to bring it to the

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Court’s attention.)

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Property “is owned by Angelique and George Stroomberg” and that

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Defendant Southwell “has no ownership” in the Cerbere Property.

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Mot. at 5.

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is a citation to Exhibit 15 to the FAC, which is a non-translated

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foreign-language document.

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unaccompanied by a valid English translation, is not helpful to

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the Court.

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the B&P licensing requirement applies to Defendant Southwell.

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(That is not to say that such an allegation does not

Plaintiffs now argue that the Cerbere

However, Plaintiffs’ sole support for this statement

This document,

Accordingly, Plaintiffs have not demonstrated that

b.

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FAC, Ex. 15.

Rule 9(b) Heightened Pleading Standard

Nevertheless, even if the licensing requirement did apply to

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Defendant Southwell, her alleged violation of this law, alone,

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does not satisfy the heightened pleading requirements of FRCP

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9(b).

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not cite any authority for the proposition that the “mere act of

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selling property as an unlicensed broker, without more,

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constitutes fraud.”

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specifically allege the “who, what, when, where, and how” of the

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fraud.

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2009) (quoting Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106

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(9th Cir. 2003)).

As noted by the Court in its original Order, Plaintiffs do

Order at 10.

Likewise, Plaintiffs fail to

Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir.

As the Court found in its original Order,
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Plaintiffs fail to allege specific misrepresentations made by

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Defendant Southwell individually.

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that the “elements [of fraud] most conspicuously absent from

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Plaintiff’s FAC are Defendant’s individual ‘knowledge of falsity’

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and ‘intent to defraud.’”

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at 1126). In their motion to reconsider, Plaintiffs continue to

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fail to cite specific allegations in the FAC which would satisfy

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these elements.

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specific citations to the FAC).

Moreover, the Court concluded

Order at 11 (quoting Kearns, 567 F.3d

See Mot. at 6 (failing to support argument with
Accordingly, the Court’s

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conclusion that the B&P licensing requirement is inapplicable to

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Defendant Southwell was not necessary to the Court’s finding that

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Plaintiffs failed to state a cause of action for fraud against

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Defendant Southwell.

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Plaintiffs’ reliance on the “duty to disclose” by those

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selling real estate is misplaced.

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Plaintiffs’ brief does not include any citations to the FAC, and

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Plaintiffs fail to connect their legal argument to the facts of

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the case.

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in their allegation that Traci Southwell committed actual fraud,

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and believe that the evidence presented, when viewed pursuant to

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the standard as set forth above, has achieved the heightened

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standard for pleading required for fraud.”

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statement should be followed by specific citations to the FAC,

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showing that the “who, what, when, where, and how” of the fraud

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have been specifically pleaded.

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Absent such support, such conclusory statements are not

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persuasive.

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Associates, Inc., 1995 WL 540072, at *3 (N.D. Cal. Sept. 6, 1995)

Mot. at 11-12.

Mot. at 11.

This section of

Plaintiffs state that they “are secure

Mot. at 12.

This

Kearns, 567 F.3d at 1124.

See R.E. Serv. Co., Inc. v. Johnson & Johnston

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(“the party seeking reconsideration must assert more than a

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simple disagreement with the court's decision”).

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disclose” does not alter the heightened pleading standard for

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fraud, and Plaintiffs still have not cited any specific

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misrepresentations made by Defendant Southwell individually, with

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“knowledge of falsity” and “intent to defraud.”

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at 1126.

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2.

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The “duty to

Kearns, 567 F.3d

Unlawful Business Practices and Advertising

As Plaintiffs’ third and fourth causes of action – for

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unlawful business practices and advertising – were grounded in

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fraud, they were properly dismissed when Plaintiffs failed to

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meet the heightened pleading standard of FRCP 9(b).

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567 F.3d at 1127 (where a cause of action relies on “a unified

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fraudulent course of conduct,” allegations supporting that cause

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of action must meet the heightened pleading standard for fraud).

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3.

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See Kearns,

Civil RICO

Plaintiffs argue that the Court “dismissed Plaintiffs’ Civil

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RICO claim, not because the claim, as it was pleaded, was

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deficient; or because it did not satisfy the Fed. R. Civ. P. 9(b)

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higher standard for fraud; but it dismissed the claim because

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Plaintiffs did not acknowledge Defendant’s argument.”

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Although the Court noted that “Defendant’s motion is unopposed

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with respect to the civil RICO claim,” the Court also cited a

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Ninth Circuit case which held that “FRCP 9(b)’s specific pleading

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requirement applies to civil RICO claims grounded in fraud.”

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Order at 9 (citing Edwards v. Marin Park, Inc., 356 F.3d 1058,

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1065-66 (9th Cir. 2004)).

Mot. at

This is a mischaracterization of the Court’s Order.

Accordingly, the dismissal of the
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civil RICO claim was not procedural, but based on Plaintiffs’

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failure to sufficiently plead its fraud claim.

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proper.

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The dismissal was

Vicarious Liability

The Court initially found that Defendant Southwell could not

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be held vicariously liable for the actions of Stroomwell, Inc.

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Order at 6-8.

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agent-immunity rule, which precludes vicarious liability for

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individuals acting “in their official capacities on behalf of the

In making this finding, the Court relied on the

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corporation and not as individuals for their individual

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advantage.”

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

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that Defendant Southwell’s alleged violation of the B&P renders

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the agent-immunity rule inapplicable to this case.

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Specifically, Plaintiffs argue that Defendant Southwell’s

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“unlawful actions cannot be found, as a matter of law, to be done

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in her official capacity on behalf of the corporation.”

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proposition.

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of Stroomwell, Inc., as defined in its Articles of Incorporation,

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is to engage in “any lawful act or activity.”

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FAC, Ex. 4).

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for Defendant Southwell to commit any unlawful act in her

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official capacity on behalf of Stroomwell, Inc.

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Plaintiffs again cite no legal authority for this proposition.

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Mot. at 6.

Order at 6-7 (quoting Applied Equip. Corp. v. Litton
Plaintiffs argue

Mot. at 6.

Mot. at

However, Plaintiffs fail to cite any legal authority for this
Mot. at 6.

Plaintiffs also note that the “Purpose”

Mot. at 6 (citing

Plaintiffs contend that it is therefore impossible

Mot. at 6.

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Assuming, arguendo, that Defendant Southwell’s actions were

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“unlawful,” in that they violated the B&P licensing requirement,
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the agent-immunity rule still applies.

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Plaintiffs fail to cite any legal authority for the proposition

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that unlawful actions cannot be taken in one’s official capacity

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on behalf of a corporation.

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the Court declines to find that any actions taken by Defendant

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Southwell in technical violation of a licensing requirement were

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necessarily taken not in her official capacity but rather as an

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“individual for [her] individual advantage.”

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Cal.4th at 525.

Mot. at 6.

As noted above,

Absent such authority,

Applied Equip., 7

Defendant Southwell’s actions in promoting the

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Cerbere Property directly related to her position as Secretary of

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Stroomwell, Inc., and there is no indication that they were taken

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for her individual advantage (as opposed to that of the

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corporation).

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actions – even if unlawful – were taken in her official capacity

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as an agent of Defendant Stroomwell, and the agent-immunity rule

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precludes vicarious liability.

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F.2d 805, 807 (9th Cir. 1981) (noting that a principal may be

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liable for the illegal actions taken by its agent).

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FAC ¶¶ 31-35.

Accordingly, Defendant Southwell’s

See Dark v. United States, 641

The Court declines to address Plaintiffs’ remaining

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arguments regarding vicarious liability, as they are unsupported

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by any citations to legal authority or references to the FAC.

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Mot. at 9-11.

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an op-ed in a newspaper: bare argument, without legal citations

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and references to relevant portions of the record, is not helpful

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to the Court.

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opportunity “to revisit issues that were decided, or rehash the

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same arguments already considered by the Court.”

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Inc. v. Johnson & Johnston Associates, Inc., 1995 WL 540072, at

A memorandum of law in support of a motion is not

Moreover, a motion to reconsider is not an

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R.E. Serv. Co.,

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*3 (N.D. Cal. Sept. 6, 1995).

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found that Defendant Southwell could not be held vicariously

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liable for actions of Stroomwell, Inc. or other defendants.

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Order at 6-8.

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liability are viable theories of vicarious liability in this

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case, and Plaintiffs’ argument to the contrary is not persuasive.

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5.

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In its original Order, the Court

Neither conspiracy liability nor shareholder

Leave to Amend

The Court originally dismissed Plaintiffs’ complaint without
leave to amend, insofar as it was brought against Defendant

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Southwell.

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Court’s finding that they have engaged in a bad-faith fishing

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expedition, and maintain that they are entitled to an opportunity

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to file a third complaint against Defendant Southwell.

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7-9.

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Order at 12-13.

Plaintiffs take exception to the

Mot. at

Generally, the Court will grant leave to amend “with extreme

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liberality.”

Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d

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708, 712 (9th Cir. 2001).

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propriety of granting leave to amend “by ascertaining the

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presence of any of four factors: bad faith, undue delay,

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prejudice to the opposing party, and/or futility.”

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Pace Am. Grp., Inc., 170 F.3d 877, 880 (9th Cir. 1999).

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Court found (and continues to find) that the FAC was filed

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against Defendant Southwell in bad faith for the improper purpose

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of conducting discovery against Defendant Southwell.

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567 F.3d at 1125 (noting that one of the purposes of FRCP 9(b)’s

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heightened pleading standard is to “deter plaintiffs from the

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filing of complaints ‘as a pretext for the discovery of unknown

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wrongs’”).

Nevertheless, The Court determines the

Griggs v.
The

See Kearns,

As Plaintiffs acknowledge, Defendant Southwell’s
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status as an officer of Stroomwell, Inc. does not constitute

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grounds for maintaining her as an individual defendant.

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she has done, or not done, when she controlled the corporation

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that, now, plaintiffs seek to have the opportunity to pursue.”

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Mot. at 8.

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FAC, which the Court originally relied upon in finding that

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Plaintiffs had engaged in a fishing expedition.

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(stating that Plaintiffs “believe that they are justified to

Mot. at

Nevertheless, Plaintiffs continue to argue that “it is what

This is strikingly similar to the language in the

FAC ¶ 116

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maintain [Defendant] Southwell as a defendant for purposes of

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discovery”).

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specify – in their original opposition to the motion to dismiss,

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in their motion to reconsider, and in their reply – any

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additional facts or allegations that would cure the deficiencies

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of the FAC.

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a third complaint, Plaintiffs would plead new allegations against

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Defendant Southwell individually, the Court finds that such an

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effort would be futile.

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6.

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Moreover, Plaintiffs have repeatedly failed to

Absent any indication that, if granted leave to file

Griggs, 170 F.3d at 880.

Rule 59(e)

As Plaintiffs do not present any newly discovered facts and

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do not argue that there has been an intervening change in the

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controlling law, reconsideration of the Court’s Order would only

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be appropriate if the Order was clearly erroneous or manifestly

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unjust.

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was not clearly erroneous.

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unpersuasive Plaintiffs’ argument that the Order was manifestly

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unjust, because it “leaves Plaintiffs without an opportunity to

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redress Defendant Southwell’s tortious acts.”

Griggs, 170 F.3d at 880.

As discussed above, the Order

Likewise, the Court finds

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Notice of Mot. at

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Southwell has, in fact, committed tortious acts.

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that, given multiple opportunities, Plaintiffs have been unable

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to adequately plead the aforementioned causes of action against

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Defendant Southwell.

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to do so would be futile and in bad faith.

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880.

This argument, of course, presupposes that Defendant
The Court notes

The Court finds that any further attempts
Griggs, 170 F.3d at

Accordingly, Plaintiffs’ motion to reconsider is denied.

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III.

ORDER

For the reasons set forth above, the Court DENIES
Plaintiffs’ Motion to Reconsider:
IT IS SO ORDERED.
Dated:

March 27, 2014

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