White et al v. Bromma et al

Filing 42

ORDER signed by Judge John A. Mendez on 1/30/14 GRANTING 38 Motion to Dismiss. This case will proceed against the remaining defendants, Pearson and Mid-South. (Meuleman, A)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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MARK MORAN and PATRICIA BAILEY WHITE,
individually and on behalf of a class
of similarly situated persons,

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Plaintiffs,

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No.

13-cv-00487 JAM-CKD

ORDER GRANTING ENTRUST
DEFENDANTS’ MOTION TO
DISMISS

v.
HUGH BROMMA, JAY PEARSON a/k/a JERRY
PEARSON a/k/a JERRY O. PEARSON, JR.,
ENTRUST MID-SOUTH, LLC n/k/a/ MID
SOUTH RETIREMENT SERVICES, LLC, THE
ENTRUST GROUP, INC., and ENTRUST
ADMINISTRATION, INC.,

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Defendants.
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This matter is before the Court on Defendants Hugh Bromma

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(“Bromma”), The Entrust Group, INC. (“TEG”), and Entrust

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Administration, INC.’s (“Entrust Admin”) (collectively “Entrust

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Defendants”) Motion to Dismiss (Doc. #38) Plaintiff’s Second

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Amended Complaint (“SAC”) (Doc. #33).

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White (“Plaintiff”) opposes the motion (Doc. #39) and Entrust

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Defendants replied (Doc. #41). 1

Plaintiff Patricia Bailey

For the following reasons,

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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 January 22, 2014.
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Entrust Defendants’ motion is GRANTED.

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I.

FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND

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Plaintiff and Mark Moran (“Moran”) filed this action on

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March 11, 2013, against the Entrust Defendants, Entrust Mid-

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South, LLC (“Mid-South”), and Jerry Pearson (“Pearson”) (Doc.

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#1).

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six causes of actions: (1) conversion against all Defendants;

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(2) intentional fraud against Pearson; (3) intentional fraud

On May 21, 2013, Plaintiff and Moran filed a FAC, alleging

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against all Defendants; (4) violation of California’s Elder Abuse

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and Dependent Adult Civil Protection Act (“Elder Abuse claim”),

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Welfare and Institutions Code § 15600 et seq., against all

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Defendants; (5) Unfair Competition (“UCL”) claim, Business and

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Professions Code § 17200 et seq., against all Defendants; and

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(6) civil Racketeer Influenced and Corrupt Organizations (“RICO”)

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claim, 18 U.S.C. § 1961 et seq., against all Defendants. FAC

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¶¶ 240-301.

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claims against them.

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Entrust Defendants’ motion, finding that all of Moran’s claims

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were time barred under the applicable statute of limitations and

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finding that Plaintiff’s intentional fraud claim and UCL claim

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were time barred.

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to Dismiss (“Order”), Doc. #27, at 17.

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Plaintiff’s Elder Abuse claim and RICO claim with leave to amend

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for failure to allege sufficient facts.

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2013, Plaintiff filed her SAC, alleging an Elder Abuse claim and

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a RICO claim against all Defendants.

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///

The Entrust Defendants moved to dismiss all the
On September 5, 2013, the Court granted the

Order Granting the Entrust Defendant’s Motion

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The Court also dismissed

Id.

On October 11,

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According to the SAC, Plaintiff allegedly invested in Self-

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Directed Individual Retirement Accounts (“IRAs”) administered by

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Entrust Defendants.

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by a trustee or custodian that permits investment in a broader

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set of assets than is permitted by most IRA custodians.

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n.1.

Bromma was allegedly the CEO of TEG and Entrust Admin.

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¶ 2.

Mid-South was allegedly a licensee of Entrust Admin and

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Pearson was a principal of Mid-South.

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SAC ¶ 1.

A Self-Directed IRA is an IRA held

Id. ¶ 1
Id.

Id. ¶¶ 3, 8.

On or about July 2006, Plaintiff, who is 66 years old,

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allegedly invested $120,000 through an Entrust Self-Directed IRA.

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Id. ¶ 46.

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in Loral Langemeier and Pearson’s company called Crumb R Us

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(“CRU”).

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retirement money to a Mid-South Self-Directed IRA through Pearson

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to invest in CRU.

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Self-Directed IRA and had $146,631.04 wired to Mid-South out of

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which $120,000 was invested with CRU and the balance was placed

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in an unrelated investment.

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an unsecured promissory note that accrued interest at a yearly

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rate of 12% and expired on October 15, 2007.

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Plaintiff allegedly received payments on the note for 2006 and

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2007 and she then decided to extend the promissory note.

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158.

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Plaintiff’s acquaintances were raising money to invest

Id. ¶ 154.

Plaintiff was told to transfer her

Id. ¶ 155.

In July 2006, Plaintiff opened a

Id. ¶ 156.

In return, she received

Id. ¶ 157.

Id. ¶

In the third quarter of 2008, the interest payments

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allegedly stopped.

Id. ¶ 161.

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find out what happened, Pearson told her that his investment “had

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gone bad.”

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investors participated in a conference call with an attorney who

Id. ¶ 162.

When she contacted Pearson to

In July 2009, Plaintiff and other

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represented Pearson.

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Pearson had attempted to pay the investors from other investment

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projects but all of Pearson’s investments had heavy losses.

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¶ 164.

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2009, his businesses were improving due to hard work and that

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Pearson would try to sell off his remaining assets to pay

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investors but that would require CRU investors to move their

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Self-Directed IRAs out of Mid-South.

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allegedly also told Plaintiff that repayments would begin in July

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The attorney told her that

Id.

However, Pearson allegedly had indicated that as of July

2010.

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Id. ¶ 163.

Id. ¶ 165.

The attorney

Id. ¶ 166.
In 2009, Pearson allegedly also told Plaintiff to move the

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administration of her Entrust Self-Directed IRA from Mid-South to

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another Entrust entity in Sacramento, California.

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White met with an employee of the Entrust entity in Sacramento

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office and talked to this employee several times about her

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worthless investment and the fact that her statements were still

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showing a fair market value of $120,000 for her Self-Directed

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IRA.

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Id. ¶ 168.

Id. ¶ 169.
Plaintiff allegedly never received repayments, settlement

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documents for execution, or quarterly reports from Pearson.

Id.

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¶ 170.

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White allegedly contacted Bromma.

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told her that he had become suspicious of Langemeier in 2006, but

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he allegedly did not offer her any assistance.

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In July 2011, White contacted the president of TEG to tell him

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about her situation.

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received a statement with conflicting information about her Self-

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Directed IRA account.

In September 2010, “fed up with the lack of assistance,”

Id. ¶¶ 178.

Id. ¶ 180.
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Id. ¶ 171.

Bromma allegedly

Id. ¶¶ 172-73.

In 2013, White allegedly

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///
In addition, Plaintiff alleges that “[f]rom 2008 until

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today, [White] has never been notified by ENTRUST that her CRU

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promissory note was in default or that it had expired.”

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¶ 183.

Id.

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II.

OPINION

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A.

Legal Standard

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A party may move to dismiss an action for failure to state a

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claim upon which relief can be granted pursuant to Federal Rule

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of Civil Procedure 12(b)(6).

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

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that is plausible on its face.”

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556 U.S. 662, 570 (2007).

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district court must accept all the allegations in the complaint

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as true and draw all reasonable inferences in favor of the

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plaintiff.

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overruled on other grounds by Davis v. Scherer, 468 U.S. 183

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(1984); Cruz v. Beto, 405 U.S. 319, 322 (1972).

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entitled to the presumption of truth, allegations in a complaint

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or counterclaim may not simply recite the elements of a cause of

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action, but must sufficiently allege underlying facts to give

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fair notice and enable the opposing party to defend itself

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effectively.”

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2011), cert. denied, 132 S. Ct. 2101, 182 L. Ed. 2d 882 (U.S.

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2012).

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must plausibly suggest an entitlement to relief, such that it is

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not unfair to require the opposing party to be subjected to the

To survive a motion to dismiss a

Bell Atlantic Corp. v. Twombly,

In considering a motion to dismiss, a

Scheuer v. Rhodes, 416 U.S. 232, 236 (1974),

“First, to be

Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir.

“Second, the factual allegations that are taken as true

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expense of discovery and continued litigation.”

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that are mere “legal conclusions” are therefore not entitled to

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the presumption of truth.

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(2009) (citing Twombly, 550 U.S. at 555).

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appropriate when a plaintiff fails to state a claim supportable

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by a cognizable legal theory.

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Department, 901 F.2d 696, 699 (9th Cir. 1990).

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Id.

Assertions

Ashcroft v. Iqbal, 556 U.S. 662, 678
Dismissal is

Balistreri v. Pacifica Police

Upon granting a motion to dismiss for failure to state a
claim, a court has discretion to allow leave to amend the

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complaint pursuant to Federal Rule of Civil Procedure 15(a).

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“Dismissal with prejudice and without leave to amend is not

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appropriate unless it is clear . . . that the complaint could not

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be saved by amendment.”

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Inc., 316 F.3d 1048, 1052 (9th Cir. 2003).

Eminence Capital, L.L.C. v. Aspeon,

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B.

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The Entrust Defendants move to dismiss Plaintiff’s remaining

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Discussion

RICO and Elder Abuse claim alleged against them.
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RICO Claim

The Entrust Defendants primarily assert that Plaintiff’s

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RICO claim fails because she does not allege the existence of an

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enterprise that is distinct from Defendants themselves because

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subsidiaries and affiliates of a corporation generally do not

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constitute an enterprise.

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sufficient facts because an associated-in-fact enterprise does

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not require any particular organizational structure, separate or

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otherwise, under the Ninth Circuit’s holding in Odom v. Microsoft

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Corp., 486 F.3d 541 (9th Cir. 2007) (en banc).

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Plaintiff argues that she has alleged

Under 18 U.S.C. § 1962(c), “[i]t shall be unlawful for any
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person employed by or associated with any enterprise engaged in,

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or the activities of which affect, interstate or foreign

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commerce, to conduct or participate, directly or indirectly, in

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the conduct of such enterprise's affairs through a pattern of

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racketeering activity or collection of unlawful debt.”

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state a claim, a plaintiff must allege: “(1) conduct (2) of an

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enterprise (3) through a pattern (4) of racketeering activity.”

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Odom, 486 F.3d at 547.

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associated-in-fact enterprise under RICO does not require any

To a

In Odom, the Ninth Circuit held that “an

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particular organizational structure, separate or otherwise.”

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F.3d 541, 551 (9th Cir. 2007) (no requirement of an

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“ascertainable structure”).

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is ‘a group of persons associated together for a common purpose

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of engaging in a course of conduct.’”

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States v. Turkette, 452 U.S. 576, 583 (1981)).

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establish an associated-in-fact enterprise, a plaintiff must

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allege (i) a common purpose of engaging in a course of conduct;

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(ii) evidence of an “ongoing organization, formal or informal”;

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and (iii) evidence that the various associates function as a

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continuing unit.

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“[A]n associated-in-fact enterprise

Id. at 552 (quoting United
Therefore, to

Id. (citing Turkette, 452 U.S. at 583).

Originally, in the FAC, Plaintiff alleged broadly that all

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Defendants were the persons and the enterprise with no

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explanation and therefore, the Court dismissed Plaintiff’s claim

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with leave to amend.

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alleges, “On their face, the Defendants existed independently as

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a separate legal person or entity, in order to conduct various

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types of businesses and/or transactions,” and “Defendants banded

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together in a hierarchical structure for spurts of activity

Order at 15-16.

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In the SAC, Plaintiff now

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involving the illegal acts and fraud set forth herein that

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injured Plaintiff and the Class Members.

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multiple corporate entities associating with multiple

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individuals.”

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these allegations are vague.

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terms “multiple corporate entities” and “multiple individuals,”

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in the opposition, Plaintiff clarifies that each Defendant is a

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person and together they are an associated-in-fact enterprise.

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See River City Markets, Inc. v. Fleming Foods W., Inc., 960 F.2d

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1458, 1462 (9th Cir. 1992) (holding “a plaintiff is free to name

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all members of an association-in-fact enterprise as individual

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defendants”).

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SAC ¶ 244.

The enterprise included

The Entrust Defendants argue that
Although Plaintiff uses the vague

The Entrust Defendants argue that even if Plaintiff’s

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allegations are not vague, the combination of the individual

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defendants does not create a new entity because the associated-

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in-fact enterprise “consists of nothing more than a parent, its

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subsidiary, its CEO and its licensee/franchisee,” which is

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insufficient.

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that Entrust Admin is a wholly owned subsidiary of TEG, Entrust

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Mid-South was a licensee of TEG, Bromma was the CEO of TEG and

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Entrust Admin, and Pearson was the CEO and owner of Mid-South.

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SAC ¶¶ 7-10.

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in-fact enterprise consisting of a corporate defendant, its

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affiliates, and two of its officers.

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Entrust Corporate defendants, by themselves, satisfy the

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requirement of pleading at least two distinct entities, citing

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Cedric Kushner Promotions, Ltd., v. King, 533 U.S. 158 (2001).

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Opp. at 15-16.

Mot. at 18-19.

Specifically, Plaintiff alleges

Therefore, Plaintiff has identified an associated-

Plaintiff argues that the

However, as Defendants argue, in Cedric Kushner
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Promotions, the defendant owner/employee was not alleged to be a

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part of the RICO enterprise and the corporation was not alleged

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to be the RICO person.

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corporate family and consequently, the distinctiveness

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requirement is not satisfied.

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Evansville, LLC v. Dreyer’s Grand Ice Cream, Inc., No. 09–5815

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CW, 2010 WL 3619884 (N.D. Cal. Sep.10, 2010) (“[A] § 1962(c)

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claim could not be based on a RICO enterprise comprised of a

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corporation, a wholly-owned subsidiary and an employee of that

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corporate family if these entities were also plead as the RICO

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persons.”)

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corporations may constitute an associated-in-fact enterprise, the

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enterprise must still be distinct from the person, which

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Plaintiff has not properly alleged in this case.

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Here, all Defendants are part of the same

See Ice Cream Distrib. of

Therefore, even though under Odom several

Accordingly, the Court dismisses Plaintiff’s RICO claim.

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Because Plaintiff has not indicated any other facts that she may

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be able to allege to pursue this cause of action, and she has had

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two opportunities to properly plead this claim, further amendment

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is futile.

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Defendants’ arguments that Plaintiff has failed to allege any

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predicate acts, causation, or fraud.

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In addition, the Court need not address the Entrust

2.

Elder Abuse Claim

The Entrust Defendants move to dismiss Plaintiff’s Elder

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Abuse claim because the Elder Abuse Act does not create an

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independent cause of action and even if there was an elder abuse

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cause of action, Plaintiff has not alleged sufficient facts.

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Plaintiff asserts that the Elder Abuse Act creates an independent

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cause of action but provides no authority.
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Opp. at 21.

However,

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the Court need not address this argument for the reasons

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mentioned below.

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The Court previously dismissed Plaintiff’s Elder Abuse claim

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because she failed to distinguish between Defendants as required

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by Federal Rule of Civil Procedure 9(b) since her claim is based

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on fraud.

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12-03959, 2013 WL 2606407, at *5 (N.D. Cal. June 11, 2013)

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(noting that the Ninth Circuit “has held that Rule 9(b) prevents

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plaintiffs from lumping defendants together for the purposes of

Order at 16 (citing Levine v. Entrust Grp., Inc., C

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fraud allegations”)).

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Defendant under her Elder Abuse claim.

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alleges the Entrust corporate structure.

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addition, Plaintiff continues to improperly group the Entrust

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Defendants together.

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¶ 217 (“Defendants’ conduct resulted in the property of Plaintiff

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PATRICIA BAILEY WHITE and the California Senior Subclass Members

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being wrongfully taken”); ¶ 152 (“Defendants willfully and

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purposefully ignored their own policies and procedures as well as

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controlling laws and regulations applicable to SDIRA Custodians

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to facilitate, aid, abet and conceal the fraud perpetrated

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against Plaintiff and the Class Members and conceal the

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wrongdoing by PEARSON in the sale of illegal securities”).

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In her SAC, Plaintiff now lists each
However, she merely reSAC ¶¶ 208-216. In

See generally SAC ¶¶ 73-89; see also SAC

Accordingly, the Court dismisses Plaintiff’s Elder Abuse

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claim. Plaintiff has not demonstrated that she can allege

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specific acts by each Defendant in good faith, therefore, the

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Court does not grant leave to amend.

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3.

Leave to Include New Claims

Plaintiff states that if granted leave to amend, the amended
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pleading would include claims of rescission and breach of

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contract.

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properly before the Court.

The Court denies Plaintiff’s request as it is not
Opp. at 24.

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III. ORDER
For the reasons set forth above, the Court GRANTS without

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leave to amend the Entrust Defendants’ Motion to Dismiss.

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case will proceed against the remaining Defendants, Pearson and

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Mid-South.

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IT IS SO ORDERED.
Dated:

January 30, 2014

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This