Paskenta Band of Nomlaki Indians et al v. Crosby et al

Filing 255

ORDER signed by District Judge Morrison C. England, Jr. on 7/15/2016 GRANTING 173 Motion to Dismiss Third-Party Complaint. The 156 Third-Party Complaint is DISMISSED with no leave to amend. (Zignago, K.)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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PASKENTA BAND OF NOMLAKI
INDIANS; and PASKENTA
ENTERPRISES CORPORATION,

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Plaintiffs,

INES CROSBY; et al.,
Defendants.

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)
INES CROSBY; JOHN CROSBY;
LESLIE LOHSE; and LARRY LOHSE,
Third-Party Plaintiffs,

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ORDER GRANTING THIRD-PARTY
DEFENDANTS’ MOTION TO DISMISS

v.

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No. 2:15-cv-00538-MCE-CMK

v.
ANDREW FREEMAN, BRUCE
THOMAS, and CHUCK GALFORD,
and DOES 1-10,
Third-Party
Defendants.

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Third-Party Defendants Andrew Freeman, Bruce Thomas and Chuck Galford

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(collectively, “Third-Party Defendants”) move to dismiss (ECF No. 173) Third-Party

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Plaintiffs Ines Crosby, John Crosby and Leslie Lohse’s (collectively, “Third-Party
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Plaintiffs”) Third-Party Complaint (ECF No. 156) under Federal Rule of Civil Procedure

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(“Rule”) 12(b)(6).1 For the reasons that follow, Third-Party Defendants’ motion is

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GRANTED.

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PROCEDURAL BACKGROUND

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On March 10, 2015, Plaintiffs Paskenta Enterprises Corporation (“PEC”) and

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Paskenta Band of Nomlaki Indians (“Tribe”) (collectively, “Plaintiffs”) filed their complaint

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against RICO Defendants alleging, inter alia, claims of racketeering, aiding and abetting,

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fraud, conspiracy, and violations of fiduciary duties owed to the tribe. (ECF No. 1.)

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Subsequently, Plaintiffs amended their complaint and filed a First Amended Complaint

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(“FAC”, ECF No. 30) on April 17, 2015. Multiple motions to dismiss Plaintiffs’ FAC

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followed. (ECF Nos. 44, 46, 40, 51, 53, & 54.) On August 14, 2015, the Court GRANTED

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in part and DENIED in part these motions and gave Plaintiffs leave to file a Second

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Amended Complaint (“SAC”) addressing the deficiencies in their FAC. (ECF No. 101.)

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On September 25, 2015, Plaintiffs filed their SAC (ECF No. 132) which was again

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followed by a round of motions to dismiss (ECF Nos. 139, 141, 143. & 145). On April 20,

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2016, the Court GRANTED in PART and DENIED in part these motions and gave

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Plaintiffs partial leave to file a Third Amended Complaint (“TAC”) addressing the

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deficiencies in their SAC.

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On November 16, 2015, Third-Party Plaintiffs filed their Third-Party Complaint

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against Third-Party Defendants (ECF No. 156), which Third-Party Defendants now seek

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to dismiss in its entirety. (ECF No. 173.)

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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 7, 2016.

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FACTUAL ALLEGATIONS2

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Third-Party Plaintiffs allege that to the extent they are held liable to the Tribe

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and/or PEC for any alleged wrongdoing, such liability can only be derivative from and/or

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concurrent with the acts and liability of Third-Party Defendants. Third-Party Plaintiffs

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allege that the tribe, led by Andrew Freeman as Chairperson of the Tribal Council,

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targeted and removed Third-Party Plaintiffs from the tribe in order to reduce the Tribe’s

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membership so as to allow the remaining tribal members to both claim a bigger share of

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the Tribe’s new wealth and allow Mr. Freeman and his allies to take complete control of

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the Tribe itself. According to Third-Party Plaintiffs, Mr. Freeman was materially assisted

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in his tribal coup by Bruce Thomas, CEO of the Tribe’s casino and CEO of a tribal

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business called MD Barnmaster, and Chuck Galford, a member of PEC’s Board of

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Directors, and a vice-president of a tribal business called Tepa LLC. Third-Party Plaintiffs

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assert the following claims for relief: (1) equitable indemnity against all Third-Party

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Defendants; (2) contribution against all Third-Party Defendants; and (3) declaratory relief

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against all Third-Party Defendants.

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STANDARD

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On a motion to dismiss for failure to state a claim under Federal Rule of Civil

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Procedure 12(b)(6), all allegations of material fact must be accepted as true and

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construed in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins.

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Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Rule 8(a)(2) “requires only ‘a short and plain

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statement of the claim showing that the pleader is entitled to relief’ in order to ‘give the

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defendant fair notice of what the . . . claim is and the grounds upon which it rests.’” Bell

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Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41,

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Unless otherwise noted, the allegations in this section are drawn directly, and in some cases
verbatim, from the allegations of Third-Party Plaintiffs’ Third-Party Complaint.

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47 (1957)). A complaint attacked by a Rule 12(b)(6) motion to dismiss does not require

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detailed factual allegations. However, “a plaintiff's obligation to provide the grounds of

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his entitlement to relief requires more than labels and conclusions, and a formulaic

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recitation of the elements of a cause of action will not do.” Id. (internal citations and

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quotations omitted). A court is not required to accept as true a “legal conclusion

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couched as a factual allegation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting

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Twombly, 550 U.S. at 555). “Factual allegations must be enough to raise a right to relief

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above the speculative level.” Twombly, 550 U.S. at 555 (citing 5 Charles Alan Wright &

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Arthur R. Miller, Federal Practice and Procedure § 1216 (3d ed. 2004) (stating that the

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pleading must contain something more than “a statement of facts that merely creates a

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suspicion [of] a legally cognizable right of action”)).

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Furthermore, “Rule 8(a)(2) . . . requires a showing, rather than a blanket

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assertion, of entitlement to relief.” Twombly, 550 U.S. at 555 n.3 (internal citations and

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quotations omitted). Thus, “[w]ithout some factual allegation in the complaint, it is hard

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to see how a claimant could satisfy the requirements of providing not only ‘fair notice’ of

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the nature of the claim, but also ‘grounds' on which the claim rests.” Id. (citing Wright &

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Miller, supra, at 94, 95). A pleading must contain “only enough facts to state a claim to

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relief that is plausible on its face.” Id. at 570. If the “plaintiffs . . . have not nudged their

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claims across the line from conceivable to plausible, their complaint must be dismissed.”

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Id. However, “[a] well-pleaded complaint may proceed even if it strikes a savvy judge

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that actual proof of those facts is improbable, and ‘that a recovery is very remote and

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unlikely.’” Id. at 556 (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).

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A court granting a motion to dismiss a complaint must then decide whether to

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grant leave to amend. Leave to amend should be “freely given” where there is no

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“undue delay, bad faith or dilatory motive on the part of the movant, . . . undue prejudice

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to the opposing party by virtue of allowance of the amendment, [or] futility of the

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amendment . . . .” Foman v. Davis, 371 U.S. 178, 182 (1962); Eminence Capital, LLC v.

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Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (listing the Foman factors as those to
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be considered when deciding whether to grant leave to amend). Not all of these factors

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merit equal weight. Rather, “the consideration of prejudice to the opposing party . . .

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carries the greatest weight.” Id. (citing DCD Programs, Ltd. v. Leighton, 833 F.2d 183,

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185 (9th Cir. 1987)). Dismissal without leave to amend is proper only if it is clear that

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“the complaint could not be saved by any amendment.” Intri-Plex Techs. v. Crest Group,

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Inc., 499 F.3d 1048, 1056 (9th Cir. 2007) (citing In re Daou Sys., Inc., 411 F.3d 1006,

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1013 (9th Cir. 2005); Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir.

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1989) (“Leave need not be granted where the amendment of the complaint . . .

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constitutes an exercise in futility . . . .”)).

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ANALYSIS

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A. Equitable Indemnity or Contribution for Statutory Violations

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Third-Party Defendants argue that there is no right to contribution or indemnity

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under the statutory claims asserted by the SAC’s First through Eighth Claims for Relief,

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(Mot. at 8:23-25.). Although Third-Party Plaintiffs counter that they do not seek to hold

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Third-Party Defendants liable for statutory violations, the Third-Party Complaint does not

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clearly reflect this contention. Indeed, the Third-Party Complaint simply states that to the

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extent Third-Party Plaintiffs are held liable for any causes of action in the SAC, Third-

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Party Defendants are likewise liable for damages allegedly sustained by the Tribe.

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Third-Party Plaintiffs therefore claim they are entitled to indemnification from Third-Party

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Defendants, to the extent permitted by the facts or the law. (SAC ¶ 110.). Based on

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Third-Party Plaintiffs’ apparent retraction of any such indemnification rights as to the

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SAC’s statutory claims, however, they appear to be waiving any claim for indemnity or

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contribution based upon the first eight claims of the SAC. Nonetheless, for the reasons

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that follow, Third-Party Plaintiffs have no right to indemnity as a matter of law in any

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event as to the SAC’s statutory claims.

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“A defendant held liable under a federal statute has a right to contribution or

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indemnification from another who has also violated the statute only if such right arises

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(1) through the affirmative creation of a right of action by Congress, either expressly or

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implicitly, or (2) via the power of the courts to formulate common law.” Mortgs., Inc. v.

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U.S. Dist. Ct. for Dist. of Nev. (Las Vegas), 934 F.2d 209, 212 (9th Cir. 1991) (citing Tex.

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Indus., Inc. v. Radcliff Materials, 451 U.S. 630, 638 (1981)).

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1. RICO Violations (SAC Claims 1-6)
“[N]o rights of contribution are available to defendants under RICO.” Nelson v.
Bennett, 662 F. Supp. 1324, 1339, n. 23 (E.D. Cal. 1987). Therefore, Third-Party

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Plaintiffs’ claims for indemnification or contribution from potential RICO liability are

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dismissed with prejudice.

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2. Violations of the Federal Computer Fraud and Abuse Act (SAC
Claim 7)
Third-Party Defendants argue that the Third-Party Plaintiffs cannot seek or obtain

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indemnity or contribution from the Third-Party Defendants for violation of the Federal

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Computer Fraud and Abuse Act (CFAA), 18 U.S.C. § 1030(a)(3), both because that

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statute does not provide for contribution or indemnity and because it is akin to an

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intentional tort.

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“[C]laims based on the [CFAA], to the extent they can be construed as tort claims,

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require proof of intentional conduct[,]” rendering contribution unavailable to defendants.”

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Axis Surplus Ins. Co. v. Mitsubishi Caterpillar Forklift Am. Inc., No. CIV.A. H-11-3745,

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2011 WL 6780908, at *3 (S.D. Tex. Dec. 27, 2011); see also Riverhead Sav. Bank v.

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Nat’l Mortg. Equity Corp., 893 F.2d 1109, 1116 (9th Cir. 1990) (holding there is no right

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of indemnification for intentional torts).

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The CFAA requires a defendant to engage in intentional misconduct to be held

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liable. See e.g., 18 U.S.C. § 1030(a)(2) (assigning liability to whoever “intentionally

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accesses a computer without authorization or exceeds authorized access”); 18 U.S.C.

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§ 1030(a)(5) (assigning liability to whoever “knowingly causes the transmission of a
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program, information, code, or command, and as a result of such conduct, intentionally

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causes damages without authorization, to a protected computer”). Therefore there is no

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statutory or common law right of indemnification for the CFAA. Accordingly, Third-Party

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Plaintiffs’ claims for indemnification or contribution based upon Third-Party Plaintiffs’

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potential liability under the CFAA are dismissed with prejudice.

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3. Violations of California’s Data Access Fraud Statute (SAC Claim 8)
Similar to the CFAA, liability under California’s Data Access Fraud Statute,

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Cal. Penal Code § 502(a), requires the person to act “knowingly” and “without

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permission” in committing computer-related crimes. Further, unlike other California

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statutes providing an express right to indemnity, California Penal Code § 502 provides

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no right to indemnity or contribution. See e.g., Cal. Civ. Code § 2847; Cal. Corp. Code

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§ 317; Cal. Gov’t Code §§ 825-825.6, 844.6; Cal. Lab. Code § 2802(a); Cal. Veh. Code

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§ 11713.13. Therefore, there is no statutory or common law right to contribution or

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indemnity for violation of Cal. Penal Code § 502(a). Accordingly, Third-Party Plaintiffs’

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claims for contribution or indemnity based on violations of § 502 are dismissed with

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prejudice.

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B. Equitable Indemnity/Contribution for Intentional Torts (SAC Claims 9-17)

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Under California law “[t]here shall be no right of contribution in favor of any

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tortfeasor who has intentionally injured the injured person.” Cal. Civ. Proc. Code

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§ 875(d); see also Riverhead Sav. Bank, 893 F.2d at 1116 (holding there is no “right of

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indemnification for intentional torts”) (citing Allen v. Sundean, 137 Cal. App. 3d 216

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(1982)). However, the Ninth Circuit has stated “California law does allow for comparative

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equitable indemni[ty] among joint intentional tortfeasors.” In re First Alliance Mortg. Co.,

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471 F.3d 977, 1005 (9th Cir. 2006).

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In their Third-Party Complaint, Third-Party Plaintiffs fail to plausibly allege that

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Third-Party Defendants are joint intentional tortfeasors; instead, Third-Party Plaintiffs

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argue only that Third-Party Defendants engaged in other actions that might lead to

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liability. For example, Third-Party Plaintiffs allege that Third-Party Defendant Freeman
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engaged in separate wrongful acts by improperly converting different funds for himself.

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Similarly, Third-Party Plaintiffs allege that Third-Party Defendants Galford and Thomas

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engaged in separate and distinct wrongdoing. Therefore, the ability to assign joint

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tortfeasor liability announced in In re First Alliance Mortg. Co., supra, does not apply to

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Third-Party Plaintiffs’ equitable claims.

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Looking to the allegations that are made within the SAC, Claims Nine through

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Seventeen allege Conversion, Fraudulent Concealment, Fraudulent Misrepresentation,

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Intentional Interference with Prospective Economic Advantage, Breach of Fiduciary Duty

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(Loyalty), Breach of Fiduciary Duty (Care), Common Counts, Civil Conspiracy, and

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Aiding and Abetting each other’s Conversion and Breaches of Fiduciary Duty. Each of

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the aforementioned claims is an intentional tort. Cal. Civ. Proc. Code § 875(d).

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Therefore, Third-Party Plaintiffs have no statutory or common law right for contribution or

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indemnity. Accordingly, Third-Party Plaintiffs’ claims for contribution or indemnity based

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on the aforementioned intentional torts (SAC Claims 9-17) are dismissed with prejudice.

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C. Equitable Indemnity or Contribution for Separately Stated Remedies
(SAC Claims 29-31)
Claims Twenty-Nine through Thirty-One in the SAC make requests for restitution,

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a constructive trust and accounting. Because these claims are separately stated

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remedies contingent upon Plaintiffs’ substantive claims for relief, which provide no right

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for contribution or indemnity, these claims similarly fail and should be dismissed with

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prejudice.

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D. Request for Declaratory Relief

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Since Third-Party Plaintiffs’ request for declaratory relief is entirely duplicative of

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the rest of Third-Party Plaintiffs’ claims, it should be dismissed. “A claim for declaratory

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relief is duplicative and unnecessary when it is commensurate with the relief sought

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through other causes of action.” Vogan v. Wells Fargo Bank, N.A., No. 2:11-CV-02098-

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JAM, 2011 WL 5826016, at *8 (E.D. Cal. Nov. 17, 2011). Therefore, Third-Party

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Plaintiffs’ request for declaratory relief is dismissed with prejudice.
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CONCLUSION

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For the reasons stated above, Third-Party Defendants’ Motion to Dismiss Third-

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Party Complaint (ECF No. 173) is GRANTED in its entirety. Because the claims made in

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the Third-Party Complaint fail as a matter of law, the Court concludes that any further

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leave to amend would be futile. Therefore, the Third-Party Complaint (ECF No. 156) is

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dismissed, with no leave to amend.

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IT IS SO ORDERED.

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Dated: July 15, 2016

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