Acres Bonusing, Inc. v. Marston

605 F.Supp.3d 1278

ACRES BONUSING, INC., et al., Plaintiffs,

v.Lester MARSTON, et al., Defendants.

Case No. 3:19-cv-05418-WHO

United States District Court, N.D. California.

Signed June 3, 2022

Ronald H. Blumberg, Blumberg Law Group LLP, Solana Beach, CA, for Plaintiffs.

James Raymond Acres, Encinitas, CA, Pro Se.

George Forman, Jay Brian Shapiro, Forman Shapiro & Rosenfeld LLP, Nicasio, CA, Allison Lenore Jones, Gordon and Rees LLP, San Diego, CA, Margaret Crow Rosenfeld, Forman & Associates, San Rafael, CA, for Defendants Lester Marston, Rapport and Marston, David Rapport, Cooper Demarse, Ashley Burrell, Lathouris Kostan, Arla Ramsey, Anita Huff, Thomas Frank, Darcy Vaughn.

David William Lerch, San Francisco, CA, Jerome Nathan Lerch, Debra Steel Sturmer, Lerch Sturmer LLP, San Francisco, CA, for Defendant Boutin Jones.

Debra Steel Sturmer, Lerch Sturmer LLP, San Francisco, CA, for Defendants Michael Chase, Daniel Stouder, Amy O'Neill.

Howard Jason Smith, Stephanie Berman Schneider, Berman Berman Berman Schneider & Lowary, LLP, Los Angeles, CA, for Defendants Amelia Burroughs, Meghan Yarnall, Janssen Malloy LLP.

ORDER ON MOTIONS TO DISMISS AND STRIKE

Re: Dkt. Nos. 78, 79, 80

William H. Orrick, United States District Judge

Plaintiffs James Acres and Acres Bonusing, Inc. ("ABI") entered into a contract with the defendants—who are associated with Blue Lake Rancheria ("Blue Lake"), a federally recognized tribe—to provide a gaming platform for Blue Lake's casino. The deal allegedly went south and some of the defendants brought suit against the plaintiffs in tribal court, represented by other defendants. Here, the plaintiffs allege that the defendants’ prosecution of the tribal suit and related actions renders them liable for misuse of process, breach of fiduciary duty, fraud, and racketeering activity.

After a trip to the Ninth Circuit and back, most of the remaining defendants are lawyers and law firms who represented the tribe in its tribal suit. They move to dismiss primarily on grounds of immunity. That motion is granted; their actions are shielded from liability by prosecutorial immunity. For completeness, I also rule on several alternative grounds for dismissal. The two other defendants, executives of the tribe, move to dismiss the racketeering claim. That motion is granted with leave to amend because no plausible racketeering activity has yet been alleged.

BACKGROUND

I. FACTUAL BACKGROUND

Acres owns ABI, a gaming company. Complaint ("Compl.") [Dkt. No. 1] ¶ 8. Blue Lake is a federally recognized tribe in Humboldt County, California. Id. ¶¶ 1, 9. It owns and operates the Blue Lake Casino & Hotel ("Blue Lake Casino" or "the Casino"). Id. ¶ 12. Defendant Arla Ramsey was its CEO, a judge of Blue Lake's tribal court, and vice-chair of the tribe's business council. Id. ¶ 13. Defendant Thomas Frank was an executive of the Casino and sometimes an officer of the tribe. Id. ¶ 14.

In 2010, Blue Lake Casino and ABI entered into an agreement that called for the Casino to purchase iSlot, an iPad-based gaming platform, from ABI for $250,000. Id. ¶ 44. In 2011 and 2013, Blue Lake and ABI were in discussions for Blue Lake to acquire nationwide distribution rights to iSlot, which ABI ultimately did not agree to. Id. ¶ 45. Attorneys from defendant law firm Boutin Jones, Inc. ("Boutin Jones") drafted the proposed agreement. Id. In August 2015, defendant Daniel Stouder, an attorney at Boutin Jones, sent ABI a letter on behalf of Blue Lake Casino demanding that ABI pay approximately $320,600 to avoid legal action related to the iSlot agreement. Id. ¶¶ 25, 48. According to the plaintiffs, the iSlot agreement expired in October 2012. Id. ¶ 47.

In January 2016, Blue Lake initiated a case in its judicial arm, the Tribal Court of the Blue Lake Rancheria ("the Tribal Court"), over the agreement. Id. ¶¶ 5, 11, 52; see also Dkt. No. 1-1 (complaint in Blue Lake Casino & Hotel v. Acres et al. , Blue Lake Tribal Court Case No. 15-1215IJM ("Tribal Court Case ")). The complaint in the Tribal Court Case alleged claims against ABI and Acres for fraudulent inducement. Dkt. No. 1-1. Boutin Jones—through its attorneys Stouder and defendants Michael Chase and Amy O'Neil—represented the Casino in that suit. Compl. ¶¶ 23–26. Eventually, defendant law firm Janssen Malloy LLP ("Janssen Malloy"), through attorney defendants Megan Yarnall and Amelia Burroughs, replaced Boutin Jones. Id. ¶¶ 26–29. Former defendant Lester John Marston was the judge in the Tribal Court Case. Id. ¶ 16. Marston eventually recused himself and was replaced by James Lambden, a retired justice of the California Court of Appeal ("Justice Lambden"). Id. ¶ 31. According to Acres, Marston did so due to conflicts of interest, including that he was the tribe's attorney. The defendant named as Rapport and Marston ("R&M") is alleged to be an association of attorneys that holds itself out as a law firm but is not registered as one. Id. ¶ 17. Marston and defendant David Rapport are the sole members. Id. ¶¶ 17–18.

Acres filed two suits in federal court to enjoin the Tribal Court Case. In the first, I dismissed the suit for failure to exhaust tribal-court remedies.

Acres v. Blue Lake Rancheria Tribal Court , No. 16-CV-02622-WHO, 2016 WL 4208328 (N.D. Cal. Aug. 10, 2016). In the second, I granted limited discovery on whether the bad-faith exception to tribal-court exhaustion applied based on Acres's allegations that Judge Marston failed to disclose conflicts of interest. See Acres v. Blue Lake Rancheria , No. 16-CV-05391-WHO, 2017 WL 733114, at *1 (N.D. Cal. Feb. 24, 2017). But I ultimately dismissed that action for failure to exhaust, see id. , at *3, and the Ninth Circuit affirmed that dismissal, Acres v. Blue Lake Rancheria , 692 F. App'x 894 (9th Cir. 2017).

In the Tribal Court Case , Justice Lambden granted summary judgment to Acres and dismissed him from the suit in July 2017. Compl. ¶ 5; id. , Ex. 2. He later dismissed the suit. Id. ¶ 5; id. , Ex. 3.

In July 2018, Acres filed a malicious prosecution suit in California state court that is "substantially similar" to this suit. Order Granting Motions to Dismiss ("Prior Order") [Dkt. No. 65] 4. The Superior Court dismissed the suit on sovereign immunity and judicial immunity or quasi-judicial immunity grounds; recently, the Court of Appeal affirmed in part and reversed in part in a published opinion. See Acres v. Marston , 72 Cal. App. 5th 417, 287 Cal.Rptr.3d 327 (2021), as modified on denial of reh'g (Dec. 10, 2021) (" State Court Case "). Its holding is described in greater detail below. The California Supreme Court denied a petition for review.

II. PROCEDURAL BACKGROUND

Acres and ABI filed this case in August 2019. They brought claims for wrongful use of civil proceedings (and aiding and abetting and conspiracy), breach of fiduciary duty (and aiding and abetting), constructive fraud, and violation of the Racketeer Influenced and Corrupt Organizations ("RICO") Act.

In March 2020, I granted the defendants’ motions to dismiss. See Prior Order. I found that "all of the defendants were functioning as the Tribe's officials or agents when the alleged acts were committed" and were consequently shielded from suit by sovereign immunity. Id. 7. In the alternative, I found that Judge Marston, Ramsey, Frank, Rapport, DeMarse, Burrell, Vaugn, and Lathouris were shielded by judicial immunity or quasi-judicial immunity. Id. 14. Because the case was dismissed in its entirety, I denied concurrently filed anti-SLAAP motions from the defendants (and a motion to strike those motions from the plaintiffs). Id. 2.

The Ninth Circuit affirmed on the issue of judicial immunity and reversed on the issue of sovereign immunity. Acres Bonusing, Inc. v. Marston , 17 F.4th 901 (9th Cir. 2021) (" Ninth Circuit Op. "). It held that sovereign immunity did not shield any of the defendants from suit because the tribe was not the real party in interest. Id. at 908. It held that Judge Marston, his law clerks, and the court clerk were entitled to judicial immunity. Id. at 916. And it held that Ramsey, Frank, Rapport, and R&M were not entitled to judicial or quasi-judicial immunity. Id. As a result, Ramsey, Frank, Rapport, R&M, Boutin Jones, Chase, Stouder, O'Neil, Janssen Malloy, Yarnall, and Burroughs remain in the suit. Id. at 917. Plaintiffs’ petition for writ of certiorari is still pending.

The Ninth Circuit's mandate issued in December 2021, Dkt. No. 72. The defendants once again have moved to dismiss.

LEGAL STANDARD

I. MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION

A motion to dismiss filed pursuant to Federal Rule of Civil Procedure ("FRCP") 12(b)(1) is a challenge to the court's subject matter jurisdiction. See Fed. R. Civ. P. 12(b)(1). "Federal courts are courts of limited jurisdiction," and it is "presumed that a cause lies outside this limited jurisdiction." Kokkonen v. Guardian Life Ins. of Am. , 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). The party invoking the jurisdiction of the federal court bears the burden of establishing that the court has the requisite subject matter jurisdiction to grant the relief requested. Id.

A challenge pursuant to Rule 12(b)(1) may be facial or factual. See White v. Lee , 227 F.3d 1214, 1242 (9th Cir. 2000). In a facial attack, the jurisdictional challenge is confined to the allegations pled in the complaint. See Wolfe v. Strankman , 392 F.3d 358, 362 (9th Cir. 2004). The challenger asserts that the allegations in the complaint are insufficient "on their face" to invoke federal jurisdiction. See Safe Air for Everyone v. Meyer , 373 F.3d 1035, 1039 (9th Cir. 2004). To resolve this challenge, the court assumes that the allegations in the complaint are true and draws all reasonable inference in favor of the party opposing dismissal. See Wolfe , 392 F.3d at 362.

"By contrast, in a factual attack, the challenger disputes the truth of the allegations that, by themselves, would otherwise invoke federal jurisdiction." Safe Air , 373...