Walter v. Drayson

Page 1162

496 F.Supp.2d 1162

Robert W. WALTER, Plaintiff, v. Richard C. DRAYSON, et al., Defendants.

Civ. No. 06-00568 SOM/KSC.

United States District Court, D. Hawaii.

July 6, 2007.

Robert W. Walter, pro se, argued, Greenwood Village, CO, for plaintiff.

Shelton G.W. Jim On, argued, Jim On & Beerman, Honolulu, HI, for Defendant Richard C. Drayson.

Mark D. Bernstein, argued, Honolulu, HI, Margery S. Bronster, present, but did not argue, Bronster Crabtree & Hoshibata, Honolulu, HI, for Defendants Elizabeth Walter.

Keith K. Hiraoka, Roeca Louie & Hiraoka LLP, Honolulu, HI, Attorneys for Defendants Karen Temple, Attorney at Law LLLC, doing business as Bodden & Temple, LLLC; Bodden & Temple, LLLC Karen M. Temple, also known as Karen M. Grant Temple, also known as Karen M. Grant.

ORDER GRANTING DEFENDANTS' MOTIONS TO DISMISS

MOLLWAY, District Judge.

Faced with a motion to dismiss for failure to state a claim, a court typically accepts as true the allegations of a complaint. But that is not required when the allegations are mere conclusions, contain unwarranted deductions, or make unreasonable inferences. That is what occurs in the federal claims raised here, and they fail as a result.

This case, at heart, is a dispute between a brother and sister about how to split trust assets left to them and their siblings by their late mother. This dispute cannot be shoehorned into the Racketeer Influenced and Corrupt Organizations Act ("RICO"), despite tireless efforts by Plaintiff Robert W. Walter ("Walter"). Stripped of implausible RICO allegations and lacking diversity jurisdiction, this action is a matter of state law over which this court declines to exercise supplemental jurisdiction.

I. FACTUAL BACKGROUND

On February 26, 2007, this court dismissed the First Amended Complaint ("FAC"), with leave to amend. A detailed discussion of the facts underlying this action is contained in the court's earlier dismissal order. See Walter v. Drayson, 2007 WL 641413 (D.Haw. Feb.26, 2007). In summary, this case concerns the disposition of the assets in the Patricia Ward Walter Living Trust, a revocable trust that Walter's mother, Patricia Walter, created for her benefit.

Patricia Walter lived on Maui and retained the Maui law firm of Bodden & Temple LLC, to represent her in various trust matters. Karen Temple, an attorney with that law firm, was active in providing legal service to the trustees.

In 2004, a different Hawaii law firm prepared an Amendment and Second Restatement of the Patricia Ward Walter Revocable Living Trust, naming as trustees Patricia Walter, Patricia Walter's daughter Elizabeth Walter, and Richard C. Drayson ("Drayson"), Patricia Walter's C.P.A. Patricia Walter retained the right to alter, amend, and revoke the trust at any time. When Patricia Walter died in 2005, Eugene H. Rock ("Rock") became a successor trustee, joining Elizabeth Walter and Drayson. Id.

Patricia Walter left four children. In this action, Robert Walter asserts that, upon his mother's death, he became irrevocably entitled to 25% of the trust's assets, with the other 75% of the trust assets to be equally divided among his three siblings. Robert Walter says that, while Patricia Walter was incapacitated by a series of strokes, his sister, Elizabeth Walter, improperly removed jewelry belonging to Patricia Walter's trust from a safe deposit box. Robert Walter also claims that, after Patricia Walter's death, Elizabeth Walter and Drayson (but not Rock) committed various breaches of fiduciary duties, including allegedly failing to rent real property and failing to stop paying Patricia Walter's caregivers.

Robert Walter is a Colorado attorney representing himself in this lawsuit, in which he sues Karen Temple and her law firm (collectively, "Temple Defendants"), Elizabeth Walter, and Drayson.¹ Defendants now move to dismiss the Second Amended Complaint ("SAC").

In the SAC, Walter asserts two RICO claims, under 18 U.S.C. § § 1962(c) and (d), as well as state law claims for, among other things, breach of fiduciary duty. The court here dismisses the SAC in its entirety. The reasons for this dismissal are set forth in detail in the following pages but can be summarized as resulting from a combination of (1) Walter's failure to state a federal claim, and (2) the absence of some other jurisdictional basis, such as diversity jurisdiction, that requires this court to exercise jurisdiction over this action. As explained below, this court recognizes that, as it had federal question jurisdiction at the outset of this action, it has discretion to exercise supplemental jurisdiction over the state law claims even after dismissing the federal RICO claims and determining that there is no diversity jurisdiction. The court declines to exercise supplemental jurisdiction over the state law claims.

II. FAILURE TO STATE A FEDERAL CLAIM.

A. Motion to Dismiss Under Rule 12(b) (6).

Rule 12(b)(6) of the Federal Rules of Civil Procedure permits dismissal of a complaint when it fails "to state a claim upon which relief can be granted." Under Rule 12(b)(6), review is generally limited to the contents of the complaint. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir.2001); Campanelli v. Bockrath, 100 F.3d 1476, 1479 (9th Cir.1996). However, courts may "consider certain materials — documents attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice — without converting the motion to dismiss into a motion for summary judgment." United States v. Ritchie, 342 F.3d 903, 908 (9th Cir.2003). Documents whose contents are alleged in a complaint and whose authenticity is not questioned by any party may also be considered in ruling on a Rule 12(b)(6) motion to dismiss. See Branch v. Tunnell, 14 F.3d 449, 453-54 (9th Cir.199A).

On a Rule 12(b)(6) motion to dismiss, all allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party. Fed'n of African Am. Contractors v. City of Oakland, 96 F.3d 1204, 1207 (9th Cir. 1996). Walter's SAC, however, calls into play the important principle that conclusory allegations of law, unwarranted deductions of fact, and unreasonable inferences are insufficient to defeat a motion to dismiss. See Sprewell, 266 F.3d at 988; Nat'l Assoc. for the Advancement of Psychoanalysis v. Cal. Bd. of Psychology, 228 F.3d 1043, 1049 (9th Cir.2000); Syntex Corp. Sec. Litig., 95 F.3d 922, 926 (9th Cir.1996). Additionally, the court need not accept as true allegations that contradict matters properly subject to judicial notice or allegations contradicting the exhibits attached to the complaint. Sprewell, 266 F.3d at 988. In other words, to survive a Rule 12(b)(6) motion to dismiss, "factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true even if doubtful in fact." Bell Atl. Corp. v. Twombly, ___ U.S. ___, ___, 127 S.Ct. 1955, 1965, 167 L.Ed.2d 929 (2007) (citations and internal quotations omitted).

"While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiffs obligation to provide the `grounds' of his `entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. at 1964 (citations and internal quotations omitted). Dismissal is appropriate under Rule 12(b)(6) if the facts alleged do not state a claim that is "plausible on its face." Id. at 1973.

It is precisely because Walter does not plead a federal RICO claim that is "plausible on its face" and instead relies on conclusory allegations of law, unwarranted deductions of fact, and unreasonable inferences that his RICO claims fail.

B. Federal Claims.

The SAC contains two counts giving rise to federal question jurisdiction under 28 U.S.C. § 1331. Count XVI asserts a RICO violation under 18 U.S.C. § 1962(c). Count XVII asserts, in part, a conspiracy to violate RICO under 18 U.S.C. § 1962(d). Neither count states a viable claim.

1. Count XVI, Asserting an Alleged RICO Violation under 18 U.S.C. § sect; 1962(c), is Dismissed.

Count XVI asserts a RICO violation under 18 U.S.C. § 1962(c), which makes it unlawful

for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.

To prevail on his civil RICO claim, Walter must therefore prove that Defendants engaged in (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity (known as predicate acts) and, additionally, must establish that (5) the defendant caused injury to Walter's business or property. See Outset v. Fleer/Skybox Int'l, LP, 300 F.3d 1083, 1086-87 (9th Cir. 2002); Grimmett v. Brown, 75 F.3d 506, 510 (9th Cir.1996); see also 18 U.S.C. §§ 1962(c), 1964(c).

The factual allegations supporting Count XVI of the SAC do not support the RICO claim. Although the SAC contains allegations that the Temple Defendants acted in some manner other than in their professional capacity, this court need not accept those allegations as true on this Rule 12(b)(6) motion to dismiss because they are "conclusory, unwarranted deductions of fact, or unreasonable inferences." Sprewell, 266 F.3d at 988. The SAC's critical failing is that it fails to properly allege that the Temple Defendants operated or managed the alleged RICO enterprise.

In Living Designs, Inc. v. E.I. Dupont de Nemours & Company, 431 F.3d 353, 361 (9th Cir.2005), cert. denied, ___ U.S. ___, 126 S.Ct. 2861, 165 L.Ed.2d 895 (2006), the Ninth Circuit recognized that an "enterprise," for purposes of § 1962(c), requires "the existence of two distinct entities: (1) a `person'; and (2) an ...