Cervantes Orchards & Vineyards, LLC v. Am. W. Bank

CERVANTES ORCHARDS & VINEYARDS, LLC, a Washington limited liability corporation;CERVANTES NURSERIES, LLC, a Washington limited liability corporation;CERVANTES PACKING & STORAGE, LLC, a Washington limited liability corporation;MANCHEGO REAL, LLC, a Washington limited liability corporation;JOSE G. CERVANTES and CYNTHIA C. CERVANTES,individually, and upon behalf of their community property marital estate; Plaintiffs, v. AMERICAN WEST BANK, a corporation; SKBHC HOLDINGS,LLC, a Washington limited liability corporation;T-16 MANAGEMENT CO, LTD, a Washington corporation;GARY JOHNSON and LINDA JOHNSON, individually and upon behalf of their community property marital estate;NW MANAGEMENT REALTY SERVICES, INC, a Washington corporation also known as Northwest Farm Management Company;and ROBERT WYLES and MICHELLE WYLES, individually andupon behalf of their community property marital estate, Defendants.

NO: 1:14-CV-3125-RMP

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WASHINGTON

July 17, 2015

ORDER REGARDING MOTIONS TO DISMISS AND MOTIONS FOR SUMMARY JUDGMENT

Before the Court are motions to dismiss filed by Defendants AmericanWest Bank ("AmericanWest") and SKBHC Holdings, LLC ("SKBHC"), ECF No. 76, and by Defendants Robert and Michelle Wyles, ECF No. 79. Also before the Court are motions for summary judgment filed by Defendants T-16 Management Co., Ltd. ("T-16") and Gary and Linda Johnson, ECF No. 88, and by Defendant SKBHC Holdings, LLC, ECF No. 122. The Court has reviewed all of the documents filed in support of and in opposition to these motions, including Plaintiffs' supplemental authority, ECF No. 127.

BACKGROUND

Plaintiffs constitute a farming group that grows crops including apples, pears, grapes, and cherries. ECF No. 74 at 4. Plaintiffs assert that Defendants engaged in a broad scheme of misconduct involving racketeering, extortion, fraud, and civil rights violations. See ECF No. 74 at 17-24. Plaintiffs claim that the purpose of the scheme was to dispossess them of their property and business. See ECF No. 74 at 17-18.

Plaintiffs assert that in October 2009, AmericanWest, in its role in the scheme, refused to accept a credit application that Plaintiffs had filed. See ECF No. 74 at 14. AmericanWest also allegedly refused applications for credit that were filed by similarly situated Hispanic farm owners, required excessive collateral to secure loans, and demanded immediate payment from Plaintiffs without a rational justification. ECF No. 74 at 14-15. SKBHC is alleged to have acted inconcert and conspired with AmericanWest in regard to these practices, which Plaintiffs contend were predicated on racial and ethnic prejudice. ECF No. 74 at 15.

Plaintiffs claim that Defendants' alleged scheme forced Plaintiff Cervantes Orchards & Vineyards, LLC ("COV") to file for bankruptcy. See ECF No. 74 at 2. A plan was adopted in COV's bankruptcy, requiring COV to satisfy its debt to Deere Credit, Inc. ("DCI") by December 31, 2009.¹ ECF Nos. 74 at 5. COV failed to repay DCI fully by the deadline, and on January 8, 2010, DCI moved the bankruptcy court for an order appointing a liquidating agent pursuant to the terms of the bankruptcy plan. ECF No. 74 at 6-7. The bankruptcy court appointed T-16 as the liquidating agent and ordered COV to turn over all control of the orchards that constituted collateral for the debt owed to DCI. See ECF No. 74 at 7-8. Defendant Gary Johnson is a director of T-16. See ECF No. 74, Ex. 1 at 2.

Plaintiffs contend that COV turned over control of the orchards to T-16 on or before March 17, 2010. ECF No. 74 at 8. According to the Second Amended Complaint, no farming activities or operations took place on the orchards for over a week after T-16 took over, despite Plaintiff Jose Cervantes's warnings that the orchards required frost protection. ECF No. 74 at 8. Plaintiffs assert that thefailure to provide the necessary protection resulted in damage to the orchards. ECF No. 74 at 8.

With DCI's approval, T-16 hired Northwest Management and Realty Services, Inc., a.k.a Northwest Farm Management ("NWFM"), to manage the property. ECF No. 74 at 8. Mr. Wyles was a partial owner of NWFM. See ECF Nos. 74, Ex. 1 at 2; 95 at 2.

Plaintiffs claim that items of their personal property, smudge pots, were wrongfully transported from the orchards "by persons believed to be employed by NWFM" to farm land that Mr. Wyles owned and operated. ECF No. 74 at 9. Plaintiffs further contend that Scott Anderson, another associate of NWFM, filed a false declaration in bankruptcy court. See ECF No. 74 at 10. The false declaration allegedly convinced the bankruptcy court to prohibit Mr. Cervantes from entering the orchards, which in turn resulted in a number of injuries to Plaintiffs, including that workers and supplies were diverted from COV's land to other land managed by NWFM. See ECF No. 74 at 10-11.

Plaintiffs also assert that multiple Defendants sought to conceal from COV and from the bankruptcy court a settlement agreement that concerned damage to apples that a buyer had acquired at an apple orchard auction in June 2010. ECF No. 74 at 13. The buyer, according to Plaintiffs' allegations, claimed that the apples were damaged because of the failure to use proper sprays. ECF No. 74 at 13. Plaintiffs assert that NWFM, T-16, Mr. Wyles, and Mr. Anderson were partiesto the agreement. ECF No. 74 at 13. The settlement agreement included a confidentiality provision, which Plaintiffs contend was meant to conceal from the bankruptcy court and from Plaintiffs the sale of a particular block of property. ECF No. 74 at 13.

Plaintiffs further allege in the Second Amended Complaint that AmericanWest sold Plaintiffs' property "for greatly diminished prices[,]" ECF No. 74 at 3, which Plaintiffs argue were the result of the other Defendants' efforts to devalue the property, ECF No. 85 at 15.

In the first and second claims of the Second Amended Complaint, Plaintiffs allege that NWFM, T-16, Mr. Johnson, Mr. Wyles and AmericanWest violated provisions of the Racketeer Influenced and Corrupt Organizations Act ("RICO") found at 18 U.S.C. § 1962(c), (d). ECF No. 74 at 17, 21. Plaintiffs also claim that AmericanWest and SKBHC committed civil rights violations, which Plaintiffs pursue under 42 U.S.C. §§ 1981, 1982, 1985(3), and 1986. ECF No. 74 at 23-24.

ANALYSIS

As noted at the beginning of this Order, two motions to dismiss and two motions for summary judgment currently are pending in this matter. For the reasons discussed below, the Court finds that Plaintiffs have failed to state claims upon which relief can be granted against all remaining Defendants. Thus, the Court reviews the Second Amended Complaint under the standard of a motion to dismiss.

Motion to Dismiss Standard

The Federal Rules of Civil Procedure allow for the dismissal of a complaint where the plaintiff fails to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). A motion to dismiss brought pursuant to this rule "tests the legal sufficiency of a claim." Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). The Supreme Court has offered the following method for assessing the sufficiency of a complaint:

[A] court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.

Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).

To withstand dismissal, a complaint must contain "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. A plaintiff is not required to establish a probability of success on the merits; however, he or she must demonstrate "more than a sheer possibility that a defendant has acted unlawfully." Id. (citing Twombly, 550 U.S. at 556).

1. Michelle Wyles and Linda Johnson

As an initial matter, Plaintiffs do not appear to assert that Defendants Michelle Wyles or Linda Johnson committed any wrongdoing. In regard to Ms. Wyles, Plaintiffs admit that they included her in this action because Mr. Wyles's alleged misconduct was on behalf of the couple's community property. ECF No. 87 at 1 n.1. "Therefore, Michelle Wyles is included as a defendant for purposes . . . affecting relief only." ECF No. 87 at 1 n.1. Plaintiffs apparently named Ms. Johnson as a defendant for the same reason. See ECF No. 74 (Second Amended Complaint listing Ms. Johnson only in caption and introductory paragraph).

"Under Washington law a personal judgment against a married man is presumed to be against the community." United States v. Overman, 424 F.2d 1142, 1148 (9th Cir. 1970). Thus, a defendant's spouse need not be named in an action in order to obtain a judgment against the marital community. See La Framboise v. Schmidt, 42 Wn.2d 198, 200 (1953).

Here, because Plaintiffs do not claim that Ms. Wyles or Ms. Johnson committed any misconduct, the Court finds that it is appropriate to dismiss them from this action on that basis.

2. RICO

Plaintiffs claim that NWFM, T-16, Mr. Johnson, Mr. Wyles and AmericanWest (collectively, "RICO Defendants") violated RICO provisions found at 18 U.S.C. § 1962(c), (d). ECF No. 74 at 17-22. Subsection (c) prohibits anyperson associated with an enterprise that conducts interstate commerce from participating in the enterprise's affairs through a "pattern of racketeering activity" or collection of unlawful debt. 18 U.S.C. § 1962(c). Subsection (d) proscribes the conspiracy to violate subsection (c). 18 U.S.C. § 1962(...